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As filed with the Securities and Exchange Commission on February 7, 2020

Registration No. 333-                

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Vertiv Holdings Co

(Exact name of registrant as specified in its charter)

 

Delaware   3679   81-2376902
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
 

(I.R.S. Employer

Identification Number)

 

 

1050 Dearborn Drive

Columbus, Ohio 43085

(212) 902-1000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Colin Flannery

General Counsel and Corporate Secretary

Vertiv Holdings Co

1050 Dearborn Drive

Columbus, Ohio 43085

(212) 902-1000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

With copies to:

Gregg A. Noel, Esq.

P. Michelle Gasaway, Esq.

Skadden, Arps, Slate, Meagher & Flom LLP

300 South Grand Avenue, Suite 3400

Los Angeles, California 90071

(213) 687-5000

 

 

Approximate date of commencement of proposed sale to the public: From time to time on or after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:  ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act.  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of
Securities to be Registered
 

Amount

to be

Registered(1)

 

Proposed

Maximum

Offering Price

Per Share

 

Proposed

Maximum

Aggregate

Offering Price

 

Amount of

Registration Fee

Primary Offering:

               

Class A common stock, par value $0.0001 per share(4)

 

33,533,303

  $11.50(2)   $385,632,984.50(2)  

$50,055.16

Secondary Offering:

               

Class A common stock, par value $0.0001 per share(5)

  270,238,621   $12.39(3)   $3,348,256,514.19(3)   $434,603.70

Warrants to purchase Class A common stock(6)

  10,606,666   —  (6)   —     —  

Units, each consisting of one share of Class A common stock, par value $0.0001 per share, and one-third of one redeemable warrant(7)

  220,000   —  (7)   —     —  

Total

          $3,733,889,498.69   $484,658.86

 

 

(1)

Pursuant to Rule 416 under the Securities Act of 1933, as amended (the “Securities Act”), the registrant is also registering an indeterminate number of additional shares of Class A common stock that may become issuable as a result of any stock dividend, stock split, recapitalization or other similar transaction.

(2)

Based upon the exercise price per share of Class A common stock issuable upon exercise of the warrants (as such term is defined under “Selected Definitions”).

(3)

Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) of the Securities Act, based upon the average of the high and low selling prices of the Class A common stock on January 31, 2020, as reported on the New York Stock Exchange, under the symbol “GSAH.” Subsequent to the consummation of the Business Combination (as such term is defined under “Selected Definitions”), on February 7, 2020, the trading symbol is “VRT.”

(4)

Consists of: (i) 22,999,970 shares of Class A common stock that may be issued upon exercise of the public warrants (as such term is defined under “Selected Definitions”) based on the number of public warrants (including the public warrants underlying the units) outstanding as of February 5, 2020; and (ii) 10,533,333 shares of Class A common stock that may be issued upon exercise of the private placement warrants (as such term is defined under “Selected Definitions”). The aggregate number of shares of Class A common stock shall be adjusted to include any additional shares of Class A common stock that may become issuable as a result of any stock dividend, stock split, recapitalization or other similar transaction.

(5)

Consists of the following shares of Class A common stock registered for resale by the Selling Holders (as such term is defined under “Selected Definitions”): (i) 10,533,333 shares of Class A common stock underlying the private placement warrants; and (ii) 259,705,288 shares of Class A common stock, including up to 17,250,000 founder shares (as such term is defined under “Selected Definitions”), 123,900,000 PIPE Shares (as such term is defined under “Selected Definitions”), 118,261,955 Stock Consideration Shares (as such term is defined under “Selected Definitions”) and 293,333 shares of Class A common stock underlying the units that are Other Registrable Securities (as such term is defined under “Selected Definitions”). The aggregate number of shares of Class A common stock shall be adjusted to include any additional shares of Class A common stock that may become issuable as a result of any stock dividend, stock split, recapitalization or other similar transaction.

(6)

Consists of: (i) 10,533,333 private placement warrants and (ii) 73,333 public warrants underlying the units that are Other Registrable Securities. Pursuant to Rule 457(g), no separate registration fee is required for the warrants.

(7)

Consists of 220,000 units that are Other Registrable Securities. Pursuant to Rule 457(g), no separate registration fee is required for the units.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this prospectus is not complete and may be changed. Neither we nor the selling securityholders may sell or distribute the securities described herein until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell and is not soliciting an offer to buy the securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED FEBRUARY 7, 2020

PRELIMINARY PROSPECTUS

 

 

LOGO

Vertiv Holdings Co

270,238,621 Shares of Class A Common Stock

10,606,666 Warrants to Purchase Class A Common Stock

220,000 Units

 

 

This prospectus relates to: (1) the issuance by us of up to 33,533,303 shares of our Class A common stock, par value $0.0001 per share (“Class A common stock”) that may be issued upon exercise of warrants to purchase Class A common stock at an exercise price of $11.50 per share of Class A common stock, including the public warrants and the private placement warrants (each as defined below); and (2) the offer and sale, from time to time, by the selling holders identified in this prospectus (the “Selling Holders”), or their permitted transferees, of (i) up to 270,238,621 shares of Class A common stock, (ii) up to 10,606,666 warrants and (iii) up to 220,000 units (each as defined below).

This prospectus provides you with a general description of such securities and the general manner in which we and the Selling Holders may offer or sell the securities. More specific terms of any securities that we and the Selling Holders may offer or sell may be provided in a prospectus supplement that describes, among other things, the specific amounts and prices of the securities being offered and the terms of the offering. The prospectus supplement may also add, update or change information contained in this prospectus.

We will not receive any proceeds from the sale of shares of Class A common stock, warrants or units by the Selling Holders pursuant to this prospectus or of the shares of Class A common stock by us pursuant to this prospectus, except with respect to amounts received by us upon exercise of the warrants to the extent such warrants are exercised for cash. However, we will pay the expenses, other than underwriting discounts and commissions, associated with the sale of securities pursuant to this prospectus.

Our registration of the securities covered by this prospectus does not mean that either we or the Selling Holders will issue, offer or sell, as applicable, any of the securities. The Selling Holders may offer and sell the securities covered by this prospectus in a number of different ways and at varying prices. We provide more information in the section entitled “Plan of Distribution.”

You should read this prospectus and any prospectus supplement or amendment carefully before you invest in our securities.

Our Class A common stock, warrants and units are traded on the New York Stock Exchange (“NYSE”) under the symbols “VRT,” “VRT WS” and “VERT.U,” respectively. On February 6, 2020, the closing price of our Class A common stock, which was then listed under the symbol “GSAH,” was $12.86 per share, the closing price of our warrants, which were then listed under the symbol GSAH WS,” was $3.35 per share, and the closing price of our units, which were then listed under the symbol “GSAH.U,” was $14.00 per share.

We are an “emerging growth company,” as that term is defined under the federal securities laws and, as such, are subject to certain reduced public company reporting requirements.

 

 

Investing in our securities involves risks. SeeRisk Factorsbeginning on page 20 and in any applicable prospectus supplement.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is February    , 2020.


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TABLE OF CONTENTS

 

ABOUT THIS PROSPECTUS

     ii  

MARKET, RANKING AND OTHER INDUSTRY DATA

     iii  

TRADEMARKS, SERVICE MARKS AND TRADE NAMES

     iii  

SELECTED DEFINITIONS

     iv  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     ix  

PROSPECTUS SUMMARY

     1  

THE OFFERING

     11  

SELECTED HISTORICAL FINANCIAL INFORMATION OF GSAH

     13  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF VERTIV HOLDINGS

     15  

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     17  

RISK FACTORS

     20  

USE OF PROCEEDS

     45  

DIVIDEND POLICY

     46  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     47  

BUSINESS COMBINATION

     58  

BUSINESS

     62  

VERTIV HOLDINGS’ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     70  

EXECUTIVE COMPENSATION

     94  

MANAGEMENT

     114  

DESCRIPTION OF SECURITIES

     123  

SECURITIES ACT RESTRICTIONS ON RESALE OF SECURITIES

     133  

BENEFICIAL OWNERSHIP OF SECURITIES

     135  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     138  

SELLING HOLDERS

     143  

PLAN OF DISTRIBUTION

     151  

UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

     153  

LEGAL MATTERS

     160  

EXPERTS

     160  

CHANGE IN AUDITOR

     162  

WHERE YOU CAN FIND MORE INFORMATION

     162  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     F-1  

 

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ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (the “SEC”) using a “shelf” registration process. Under this shelf registration process, we and the Selling Holders may, from time to time, issue, offer and sell, as applicable, any combination of the securities described in this prospectus in one or more offerings. We may use the shelf registration statement to issue up to an aggregate of 33,533,303 shares of Class A common stock upon exercise of the public warrants and private placement warrants. The Selling Holders may use the shelf registration statement to sell up to an aggregate of 270,238,621 shares of Class A common stock, up to 10,606,666 warrants and up to 220,000 units from time to time through any means described in the section entitled “Plan of Distribution.” More specific terms of any securities that the Selling Holders offer and sell may be provided in a prospectus supplement that describes, among other things, the specific amounts and prices of the Class A common stock, warrants and/or units being offered and the terms of the offering.

A prospectus supplement may also add, update or change information included in this prospectus. Any statement contained in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in such prospectus supplement modifies or supersedes such statement. Any statement so modified will be deemed to constitute a part of this prospectus only as so modified, and any statement so superseded will be deemed not to constitute a part of this prospectus. You should rely only on the information contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. See “Where You Can Find More Information.

Neither we nor the Selling Holders have authorized anyone to provide any information or to make any representations other than those contained in this prospectus, any accompanying prospectus supplement or any free writing prospectus we have prepared. We and the Selling Holders take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the securities offered hereby and only under circumstances and in jurisdictions where it is lawful to do so. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy securities, in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any prospectus supplement is accurate only as of the date on the front of those documents only, regardless of the time of delivery of this prospectus or any applicable prospectus supplement, or any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates.

This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under “Where You Can Find More Information.”

On February 7, 2020 (the “Closing Date”), Vertiv Holdings Co (formerly known as GS Acquisition Holdings Corp), consummated its previously announced business combination pursuant to that certain Agreement and Plan of Merger, dated as of December 10, 2019 (the “Merger Agreement”), by and among the Company, Vertiv Holdings, LLC, a Delaware limited liability company (“Vertiv Holdings”), VPE Holdings, LLC, a Delaware limited liability company (the “Vertiv Stockholder”), Crew Merger Sub I LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of GSAH (“First Merger Sub”), and Crew Merger Sub II LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of GSAH (“Second Merger Sub”). As contemplated by the Merger Agreement, (1) First Merger Sub merged with and into Vertiv Holdings, with Vertiv Holdings continuing as the surviving entity (the “First Merger”) and (2) immediately following the First Merger and as part of the same overall transaction as the First Merger, Vertiv

 

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Holdings merged with and into Second Merger Sub, with Second Merger Sub continuing as the surviving entity and renamed “Vertiv Holdings, LLC” (the “Second Merger” and, collectively with the First Merger and the other transactions contemplated by the Merger Agreement, the “Business Combination”).

Unless the context indicates otherwise, references to “the Company,” “we,” “us” and “our” refer to Vertiv Holdings Co, a Delaware corporation, and its consolidated subsidiaries following the Business Combination. “GSAH” refers to GS Acquisition Holdings Corp prior to the Business Combination. “Vertiv” refers to Vertiv Holdings, LLC and its subsidiaries prior to the Business Combination.

MARKET, RANKING AND OTHER INDUSTRY DATA

Certain market, ranking and industry data included in this prospectus, including the size of certain markets and our size or position and the positions of our competitors within these markets, including its products and services relative to its competitors, are based on estimates of our management. These estimates have been derived from our management’s knowledge and experience in the markets in which we operate, as well as information obtained from surveys, reports by market research firms, our customers, distributors, suppliers, trade and business organizations and other contacts in the markets in which we operate, which, in each case, we believe are reliable.

We are responsible for all of the disclosure in this prospectus and while we believe the data from these sources to be accurate and complete, we have not independently verified data from these sources or obtained third-party verification of market share data and this information may not be reliable. In addition, these sources may use different definitions of the relevant markets. Data regarding our industry is intended to provide general guidance, but is inherently imprecise. Market share data is subject to change and cannot always be verified with certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey of market shares. In addition, customer preferences can and do change. As a result, you should be aware that market share, ranking and other similar data set forth herein, and estimates and beliefs based on such data, may not be reliable. References herein to us being a leader in a market or product category refers to our belief that it has a leading market share position in each specified market, unless the context otherwise requires. In addition, the discussion herein regarding our various markets is based on how we define the markets for our products, which products may be either part of larger overall markets or markets that include other types of products and services.

Assumptions and estimates of our future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk factors—Risks Related to Our Business.” These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Cautionary Statement Regarding Forward-Looking Statements.

TRADEMARKS, SERVICE MARKS AND TRADE NAMES

This prospectus contains some of our trademarks, service marks and trade names, including, among others, Vertiv, Liebert, Chloride, NetSure, Geist, Energy Labs, Trellis, Alber, HVM and Avocent. Each one of these trademarks, service marks or trade names is either (1) our registered trademark, (2) a trademark for which we have a pending application, or (3) a trade name or service mark for which we claim common law rights. All other trademarks, trade names or service marks of any other company appearing in this prospectus belong to their respective owners. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus are presented without the TM, SM and ® symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our respective rights or the rights of the applicable licensors to these trademarks, service marks and trade names.

 

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SELECTED DEFINITIONS

Unless stated in this prospectus or the context otherwise requires, references to:

 

   

2022 Senior Notes” are to Vertiv Holdco’s $500.0 million of 12.00%/13.00% Senior PIK Toggle Notes due 2022;

 

   

2024 Senior Notes” are to Vertiv Group’s $750.0 million of 9.250% Senior Notes due 2024;

 

   

2024 Senior Secured Notes” are to Vertiv Group’s $120.0 million of 10.00% Senior Secured Second Lien Notes due 2024 (with a springing to maturity of November 21, 2021 if the 2022 Senior Notes are not repaid, redeemed or discharged, or the maturity with respect thereto is not otherwise extended, on or prior to November 15, 2021);

 

   

Asset-Based Revolving Credit Facility” are to that certain Revolving Credit Agreement, by and among, inter alia, Vertiv Group, certain direct and indirect subsidiaries of Vertiv Group as co-borrowers thereunder, various lenders and JPMorgan Chase Bank, N.A., as administrative agent, as amended, amended and restated, modified or supplemented from time to time;

 

   

Board” or “Board of Directors” are to the board of directors of the Company;

 

   

Business Combination” are to the transactions contemplated by the Merger Agreement, including: (1) the merger of First Merger Sub with and into Vertiv Holdings, with Vertiv Holdings continuing as the surviving entity (the “First Merger”); (2) immediately following the First Merger and as part of the same overall transaction as the First Merger, the merger of Vertiv Holdings with and into Second Merger Sub with Second Merger Sub continuing as the surviving entity and renamed “Vertiv Holdings, LLC” (the “Second Merger” and, together with the First Merger, the “Mergers”); and (3) the PIPE Investment, which transactions were consummated on February 7, 2020;

 

   

Bylaws” are to the Amended and Restated Bylaws of the Company;

 

   

Certificate of Incorporation” are to the Second Amended and Restated Certificate of Incorporation of the Company;

 

   

Class A common stock” are to Class A common stock, par value $0.0001 per share, of the Company;

 

   

Class B common stock” are to Class B common stock, par value $0.0001 per share, of the Company;

 

   

Closing Date” are to February 7, 2020, the date on which we completed the Business Combination;

 

   

Code” are to the Internal Revenue Code of 1986, as amended;

 

   

“common stock” are to the Class A common stock and the Class B common stock, together;

 

   

Company,” “we,” “us,” and “our” are to Vertiv Holdings Co, a Delaware corporation, and its consolidated subsidiaries;

 

   

Cote PIPE Investor” are to Atlanta Sons LLC, a Delaware limited liability company and an affiliate of David M. Cote, which purchased PIPE Shares in the PIPE Investment;

 

   

Cote Sponsor Member” are to Cote SPAC 1 LLC, a Delaware limited liability company managed by David M. Cote, which, following the dissolution of Sponsor and the distribution of the founder shares and private placement warrants held by Sponsor to its members, received 8,572,500 founder shares and 5,266,667 private placement warrants;

 

   

DGCL” are to the General Corporation Law of the State of Delaware;

 

   

Emerson” are to Emerson Electric Co., which, prior to the Separation in the fiscal fourth quarter of 2016, operated Vertiv’s business as part of its broader corporate organization;

 

   

Exchange Act” are to the Securities Exchange Act of 1934, as amended;

 

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Existing Notes” are to the 2022 Senior Notes, 2024 Senior Notes and 2024 Senior Secured Notes;

 

   

EY” are to Ernst & Young LLP, independent registered public accounting firm to Vertiv Holdings;

 

   

First Merger Sub” are to Crew Merger Sub I LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of GSAH prior to the Business Combination;

 

   

founder shares” are to the 17,250,000 shares of Class B common stock that were converted into shares of our Class A common stock at the closing of the Business Combination, of which 8,572,500 shares are held by the Cote Sponsor Member, 8,572,500 shares are held by the GS Sponsor Member and 35,000 shares are held by each of Mr. James Albaugh (a former director of GSAH), Mr. Roger Fradin and Mr. Steven S. Reinemund;

 

   

GAAP” are to the Generally Accepted Accounting Principles in the United States of America;

 

   

Goldman Sachs” are to The Goldman Sachs Group, Inc., a Delaware corporation (NYSE: GS) and its affiliates;

 

   

GS Sponsor Member” are to GS Sponsor LLC, a Delaware limited liability company and an affiliate of Goldman Sachs, which, following the dissolution of Sponsor and the distribution of the founder shares and private placement warrants held by Sponsor to its members, received 8,572,500 founder shares and 5,266,666 private placement warrants;

 

   

GSAH” are to GS Acquisition Holdings Corp, prior to the consummation of the Business Combination;

 

   

GSAH Certificate of Incorporation” are to GSAH’s amended and restated certificate of incorporation, dated June 7, 2018;

 

   

GSAM” are to Goldman Sachs Asset Management, L.P., a division of The Goldman Sachs Group, Inc.;

 

   

GS ESC PIPE Investor” are to GSAH Investors Emp LP, a Delaware limited partnership and an affiliate of Goldman Sachs;

 

   

Incentive Plan” are to the Vertiv Holdings Co 2020 Equity Incentive Plan approved in connection with the Business Combination;

 

   

Initial Stockholders” are to the Sponsor Members (as successors-in-interest to the Sponsor’s founder shares and private placement warrants) and Mr. James Albaugh, Mr. Roger Fradin and Mr. Steven S. Reinemund, GSAH’s independent directors prior to the Business Combination;

 

   

Investment Company Act” are to the Investment Company Act of 1940, as amended;

 

   

IPO” or “initial public offering” are to GSAH’s initial public offering, consummated on June 12, 2018;

 

   

JOBS Act” are to the Jumpstart Our Business Startups Act of 2012;

 

   

management” or “management team” of an entity are to the officers and directors of such entity;

 

   

Merger Agreement” are to that certain Agreement and Plan of Merger, dated as of December 10, 2019 (as it may be further amended from time to time), by and among GSAH, Vertiv Holdings, the Vertiv Stockholder, First Merger Sub and Second Merger Sub;

 

   

NYSE” are to the New York Stock Exchange;

 

   

Organizational Documents” are to the Bylaws and the Certificate of Incorporation;

 

   

Other Registrable Securities” are to the shares of Class A common stock that are held by the RRA Parties and are “Registrable Securities” under our Amended and Restated Registration Rights Agreement, other than (i) the founder shares and private placement warrants held by our Initial Stockholders, (ii) the PIPE Shares held by RRA Parties and (iii) the Stock Consideration Shares held by the Vertiv Stockholder;

 

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NYSE” are to the New York Stock Exchange;

 

   

PIPE Investment” are to the private placement pursuant to which the PIPE Investors purchased 123,900,000 shares of Class A common stock for an aggregate purchase price equal to $1,239,000,000;

 

   

PIPE Investors” are to the Cote PIPE Investor and the GS ESC PIPE Investor and certain other “accredited investors” (as defined in Rule 501 under the Securities Act), and their permitted transferees, that subscribed for and purchased shares of Class A common stock in the PIPE Investment;

 

   

PIPE Shares” are to the 123,900,000 shares of Class A common stock that were issued to the PIPE Investors in connection with the PIPE Investment;

 

   

Platinum” are to Platinum Equity Capital Partners III, L.P., Platinum Equity Capital Partners IV, L.P. and certain of their affiliates who beneficially own shares of our Class A common stock;

 

   

Platinum Advisors” are to Platinum Equity Advisors, LLC, an affiliate of Platinum;

 

   

Platinum Equity” are to Platinum Equity, LLC, its sponsored funds and affiliated private equity vehicles;

 

   

private placement warrants” are to the 10,533,333 warrants that were initially issued to Sponsor in a private placement simultaneously with the closing of the IPO;

 

   

public shares” are to the shares of Class A common stock (including those that underlie the units) that were initially offered and sold by GSAH in its IPO;

 

   

public stockholders” are to the holders of the public shares (including certain of the Initial Stockholders provided that each of their status as a “public stockholder” shall only exist with respect to such public shares);

 

   

public warrants” are to the redeemable warrants (including those that underlie the units) that were initially offered and sold by GSAH in its IPO;

 

   

RRA Parties” are to the Initial Stockholders, Vertiv Stockholder, GS ESC PIPE Investor, Cote PIPE Investor and certain other PIPE Investors party to the Amended and Restated Registration Rights Agreement;

 

   

Sarbanes-Oxley Act” are to the Sarbanes-Oxley Act of 2002;

 

   

SEC” are to the U.S. Securities and Exchange Commission;

 

   

Second Merger Sub” are to Crew Merger Sub II LLC, a Delaware limited liability company and our direct, wholly-owned subsidiary, which was renamed “Vertiv Holdings, LLC” in connection with the Business Combination;

 

   

Securities Act” are to the Securities Act of 1933, as amended;

 

   

Selling Holders” are to the selling holders identified in this prospectus and the pledgees, donees, transferees, assignees, successors and others who later come to hold any of the Selling Holders’ interest in the shares of Class A common stock, warrants and/or units, as applicable, after the date of this prospectus such that registration rights shall apply to those securities;

 

   

Senior Secured Credit Facilities” are to the Term Loan Facility and the Asset-Based Revolving Credit Facility, collectively;

 

   

Separation” are to the transaction described in Note 1 (The Transaction) to Vertiv Holdings, LLC’s historical consolidated and combined financial statements included elsewhere in this prospectus, pursuant to which Vertiv Group and certain of its affiliates acquired the assets and liabilities associated with the business, operations, products, services and activities of Vertiv Predecessor;

 

   

Sponsor” are to GS DC Sponsor I LLC, a Delaware limited liability company, which dissolved on February 7, 2020 and distributed its 17,145,000 founder shares and 10,533,333 private placement

 

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warrants to the Sponsor Members; provided that, following the dissolution of Sponsor, “Sponsor” shall include the Sponsor Members as successors-in-interest to Sponsor;

 

   

Sponsor Lock-up Period” are to (1) in the case of the founder shares, the period ending on the earlier of (A) February 7, 2021 and (B) (i) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing on or after July 6, 2020, or (ii) the date on which we complete a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of our public stockholders having the right to exchange their shares of Class A common stock for cash, securities or other property, and (2) in the case of the private placement warrants and the respective Class A common stock underlying such warrants, the period ending on March 8, 2020;

 

   

Sponsor Members” are to the GS Sponsor Member and the Cote Sponsor Member, the two members of Sponsor prior to its dissolution;

 

   

Stock Consideration” are to the shares of Class A common stock issued to the Vertiv Stockholder as stock consideration pursuant to the transactions contemplated by the Merger Agreement;

 

   

Stock Consideration Shares” are to the 118,261,955 shares of Class A common stock issued to the Vertiv Stockholder at the closing of the Business Combination as Stock Consideration;

 

   

“Subscribing Vertiv Executives” are to certain executive officers of the Company that purchased PIPE Shares;

 

   

Subscription Agreements” are to, collectively, those certain subscription agreements entered into between the Company and each of the PIPE Investors;

 

   

Tax Receivable Agreement” are to that certain Tax Receivable Agreement entered into at the closing of the Business Combination by the Company and the Vertiv Stockholder;

 

   

Term Loan Facility” are to that certain Term Loan Credit Agreement, by and among¸ inter alia, Vertiv Group, various lenders and JPMorgan Chase Bank, N.A., as administrative agent, as amended, amended and restated, modified or supplemented from time to time;

 

   

transfer agent” are to Computershare Trust Company, N.A. (“Computershare”);

 

   

trust account” are to the trust account of GSAH that held proceeds from its IPO and the sale of the private placement warrants;

 

   

trustee” are to Wilmington Trust, N.A.;

 

   

units” are to the units of the Company, each unit representing one share of Class A common stock and one-third of one redeemable warrant to acquire one share of Class A common stock, that were initially offered and sold by GSAH in its IPO (less the number of units that have been separated into the underlying public shares and underlying public warrants upon the request of the holder thereof);

 

   

Vertiv” are to Vertiv Holdings, together with its subsidiaries, including Vertiv Holding Corporation;

 

   

Vertiv Group” are to Vertiv Group Corporation, the principal operating subsidiary of the Company;

 

   

Vertiv Group Intermediate” are to Vertiv Intermediate Holding II Corporation;

 

   

Vertiv Holdco” are to Vertiv Intermediate Holding Corporation;

 

   

Vertiv Holding Corporation” are to Vertiv Holding Corporation, a Delaware corporation;

 

   

Vertiv Holdings” are to Vertiv Holdings, LLC, a Delaware limited liability company and the direct parent of Vertiv Holding Corporation;

 

   

Vertiv Predecessor” are to the Network Power business previously owned by Emerson Electric Co. and the predecessor of Vertiv Group for accounting purposes;

 

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Vertiv Stockholder” are to VPE Holdings, LLC; and

 

   

warrants” are to public warrants and private placement warrants.

Unless otherwise stated in this prospectus or as the context otherwise requires, all references in this prospectus to Class A common stock or warrants include such securities underlying the units.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains statements that are forward-looking and as such are not historical facts. This includes, without limitation, statements regarding the financial position, capital structure, dividends, indebtedness, business strategy and plans and objectives of management for future operations, including as they relate to the anticipated effects of the Business Combination. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this prospectus, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. When the Company discusses its strategies or plans, including as they relate to the Business Combination, it is making projections, forecasts or forward-looking statements. Such statements are based on the beliefs of, as well as assumptions made by and information currently available to, the Company’s management.

The forward-looking statements contained in this prospectus are based on current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that future developments affecting the Company will be those that the Company has anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the Company’s control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Factors that may cause such differences include, but are not limited to: (1) the benefits of the Business Combination; (2) the future financial performance of the Company following the Business Combination; (3) the ability to maintain the listing of the Company’s securities on the NYSE; (4) the risk that the Business Combination disrupts current plans and operations of the Company; (5) the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, the ability of the Company to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its management and key employees; (6) costs related to the Business Combination; (7) the outcome of any legal proceedings that may be instituted against the Company or any of its directors or officers, following the Business Combination; (8) the failure to realize anticipated pro forma results; (9) factors relating to the business, operations and financial performance of the Company and its subsidiaries, including: global economic weakness and uncertainty; risks relating to the continued growth of the Company’s customers’ markets; failure to meet or anticipate technology changes; the unpredictability of the Company’s future operational results; disruption of the Company’s customers’ orders or the Company’s customers’ markets; less favorable contractual terms with large customers; risks associated with governmental contracts; failure to mitigate risks associated with long-term fixed price contracts; risks associated with information technology disruption or security; risks associated with the implementation and enhancement of information systems; failure to properly manage the Company’s supply chain or difficulties with third-party manufacturers; competition in the infrastructure technologies industry; failure to realize the expected benefit from any rationalization and improvement efforts; disruption of, or changes in, the Company’s independent sales representatives, distributors and original equipment manufacturers; failure to obtain performance and other guarantees from financial institutions; failure to realize sales expected from the Company’s backlog of orders and contracts; changes to tax law; ongoing tax audits; risks associated with future legislation and regulation of the Company’s customers’ markets both in the United States and abroad; costs or liabilities associated with product liability; the Company’s ability to attract, train and retain key members of its leadership team and other qualified personnel; the adequacy of the Company’s insurance coverage; a failure to benefit from future acquisitions; failure to realize the value of goodwill and intangible assets; the global scope of the Company’s operations; risks associated with the Company’s sales and operations in emerging markets; exposure to fluctuations in foreign currency exchange rates; the Company’s ability to comply with various laws and regulations and the costs associated with legal compliance; adverse outcomes to any legal claims and proceedings filed by or against us;

 

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the Company’s ability to protect or enforce its proprietary rights on which its business depends; third party intellectual property infringement claims; liabilities associated with environmental, health and safety matters; risks associated with the Company’s limited history of operating as an independent company; and potential net losses in future periods; and (10) other risks and uncertainties indicated in this prospectus, including those under the heading “Risk Factors,” and that may be set forth in any applicable prospectus supplement under any similar caption. Should one or more of these risks or uncertainties materialize, or should any of the Company’s assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

Forward-looking statements included in this prospectus speak only as of the date of this prospectus or any earlier date specified for such statements . The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

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PROSPECTUS SUMMARY

This summary highlights certain significant aspects of our business and is a summary of information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before making your investment decision. You should carefully read this entire prospectus, including the information presented under the sections titled “Risk Factors,” “Cautionary Statement Regarding Forward Looking Statements,” “Vertiv Holdings’ Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Condensed Combined Financial Information,” and the consolidated financial statements and the related notes thereto included elsewhere in this prospectus before making an investment decision. The definition of some of the terms used in this prospectus are set forth under the section “Selected Definitions.”

Business Summary

Who we are

We are a global leader in the design, manufacturing and servicing of critical digital infrastructure technology that powers, cools, deploys, secures and maintains electronics that process, store and transmit data. We provide this technology to data centers, communication networks and commercial & industrial environments worldwide.

We aim to help create a world where critical technologies always work, and where we empower the vital applications of the digital world.

Our business

We have a suite of comprehensive offerings, innovative solutions and a leading service organization that supports a diversified group of customers, which we deliver from engineering, manufacturing, sales and service locations in more than 45 countries across the Americas, Asia Pacific and Europe, the Middle East and Africa (“EMEA”). We provide the hardware, software and services to facilitate an increasingly interconnected marketplace of digital systems where large amounts of indispensable data need to be transmitted, analyzed, processed and stored. Whether this growing quantity of data is managed centrally in hyperscale/cloud locations, distributed at the so-called “edge” of the network, processed in an enterprise location or managed via a hybrid platform, the underpinnings and operations of all those locations rely on our critical digital infrastructure and services.

We have a broad range of offerings, which include power management products, thermal management products, integrated rack systems, modular solutions, and management systems for monitoring and controlling digital infrastructure. These comprehensive offerings are integral to the technologies used for a number of services, including e-commerce, online banking, file sharing, video on-demand, energy storage, wireless communications, Internet of Things (“IoT”) and online gaming. In addition, through our global services network, we provide lifecycle management services, predictive analytics and professional services for deploying, maintaining and optimizing these products and their related systems.

Our primary customers are businesses across three main end markets: (1) data centers (including hyperscale/cloud, colocation, enterprise and edge), (2) communication networks and (3) commercial and industrial environments. Within these areas we serve a diverse array of industries, including social media, financial services, healthcare, transportation, retail, education and government. We approach these industries and end users through our global network of direct sales professionals, independent sales representatives, channel partners and original equipment manufacturers. Many of our installations are completed in collaboration with our customers



 

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and we work with them from the initial planning phase through delivery and servicing of the completed solution. This depth of interaction supports key customer relationships, sometimes spanning multiple decades. Our most prominent brands include Liebert, NetSure, Geist and Avocent.

Our business is organized into three segments according to our main geographic regions—the Americas, Asia Pacific and EMEA—and we manage and report our results of operations across these three business segments. For the nine months ended September 30, 2019, our revenue was $3,259.7 million, of which 51% was transacted in the Americas; 28% was transacted in Asia Pacific; and 21% was transacted in EMEA as compared with our revenue for the nine months ended September 30, 2018 of $3,114.0 million. For the year ended December 31, 2018, our revenue was $4,285.6 million, of which 50% was transacted in the Americas, 29% was transacted in Asia Pacific, and 21% was transacted in EMEA, and such revenue reflected an increase of $406.2 million, or 10.5%, as compared with our revenue for the year ended December 31, 2017 of $3,879.4 million. Approximately half of the increase was due to the acquisitions of Energy Labs and Geist. The remaining increases were primarily due to volume offset by purchase accounting adjustments from the valuation of acquired deferred revenue.

Our strengths

We are a customer-focused organization and have a host of strengths that allow us to act quickly and with agility to best serve our customers’ needs, including:

 

   

Stable platform for growth: We are well-positioned in the global marketplace as a key provider of critical digital infrastructure across several diverse areas, but with a uniform product set. We are able to provide multi-national customers with the ability to purchase and maintain a similar product set or technology in Asia as in the United States or the European Union and this focused approach to our served industries allows us to deploy capital and resources quickly and efficiently. In addition to our global building block approach to products, we also have a natural diversification that comes from serving various types of data center customers (including hyperscale/cloud, colocation, enterprise and edge locations), communication networks (including core and access sites) and commercial & industrial verticals (such as manufacturing and transportation). This diversification reduces our exposure to industry-specific market volatility and our geographical reach reduces our exposure to individual country or regional economic uncertainty. These factors help to stabilize our resilient business model.

 

   

Global service organization: Having a global service organization allows us to interface and support our customers in each phase of the product lifecycle. Our lifecycle services for our customers begin at the sales process for our products, continue through the installation and preventative maintenance of such products, and are maintained through a full suite of performance and predictive service applications which are utilized by our customers through the entire lifecycle of such products. Additionally, our service network acts as a global feedback mechanism, helping us improve our products, understand and address changing local/regional businesses and develop new technologies and solutions for our customers. The majority of our service revenue is derived from annuity-type contracts.

 

   

“Local Everywhere” capabilities: Our “local everywhere” approach to doing business helps us to address our customers’ region-specific needs as it promotes customer intimacy, improves our agility, increases our response times, and well-positions us to meet the varying local and regional requirements of our global customer base. As of September 30, 2019, we had sales support, engineering and manufacturing capabilities, as well as approximately 3,000 customer support employees (including over 2,700 field engineers and over 300 technical support representatives) strategically located across each of our three geographic segments of the Americas, Asia Pacific and EMEA, and a network of over



 

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19,700 employees and significant facilities across the globe, which provide us with a wide capability to service our customers and help us understand our customers’ needs, which is fundamental to supporting long-term customer relationships.

 

   

Deep domain knowledge: As a result of our decades of experience in the industry, our customers have come to rely on our understanding of trends, underlying technologies, deployment types and the implementation of our offerings. Our ability to apply these insights to our customers’ utilization of our technology is a key differentiator as compared to our competitors within these same markets. Our decades of customer intimacy and numerous marketplace touch points with our customers, beginning at the start of the sales process and extending through the entire product life cycle, allow us to have deep technical discussions and solve vital customer problems.

 

   

Comprehensive integrated solutions: We offer specialized and comprehensive solutions by combining our leading products with third-party hardware. These solutions span standard configurations that can be placed in a technology closet at edge data centers, through configured-to-order solutions for medium-sized applications, up to custom-designed solutions to serve a data center colocation or hyperscale site. As the key provider of many of the components of this solution set, we differentiate ourselves from our competitors from both a supply chain and a technology perspective and become integrated in the customers’ core design planning.

 

   

Innovative mentality: Our business has been built on a track record of innovation. Over the decades, we have been instrumental in shaping the thermal and power management markets, consistently bringing forth new products, services and solutions to an ever growing customer base. Innovation occurs at all levels of our business and we dynamically adapt our offerings to help customers solve their key issues. We plan to continue to innovate across our products, services and industries in order to optimize our offerings for our customers.

 

   

Accomplished management team: Our management team is made up of industry professionals and transformational leaders with over 100 years of combined industry experience. Our Chief Executive Officer, Rob Johnson, has successfully led public companies in the past and has over 30 years of experience in the industry. The management team that supports Mr. Johnson is customer-focused, fast-acting, commercially savvy, digitally astute and promotes the core Vertiv values on a daily basis.

Industry

Global data center IP traffic is growing at a compounded annual growth rate (“CAGR”) of 21% from 2018 to 2021. This strong demand for data is being driven by businesses and consumers alike. The need for ubiquitous connectivity (being connected on any device, at anytime, anywhere) is a key driver of the markets we serve and is fueled by applications such as video on-demand, online banking, social media, IoT and digital health among others. All of this activity yields a continued growth in data processing, storage and networking as the world continues to become more reliant on the analysis and delivery of digital content.



 

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Below is some key data that demonstrates this growth (graphics follow):

Data Boom: Key Driver of End-Market Growth

Increased Digitization, Multiple Device Connection Adoption, and IoT

LOGO



 

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LOGO



 

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Our primary customers are businesses across three main end markets: (1) data centers (including hyperscale/cloud, colocation, enterprise and edge), (2) communication networks and (3) commercial and industrial environments.

Data centers: The primary purpose of a data center is to process, store and distribute data. There are a host of different sizes and types of data centers, but primarily they can be broken down into the following classifications:

 

   

Cloud/Hyperscale: These facilities are massive in scale and are primarily used to support off-premise cloud applications. This portion of the industry is growing rapidly. Examples of companies in this space include Microsoft Azure, Amazon Web Services and Google Cloud.

 

   

Colocation: These facilities range in size and offer users a location where they can place their IT equipment, while the building and critical digital infrastructure is owned by the colocation company. This portion of the industry is growing rapidly. Examples of companies in this space include Digital Realty and Equinix.

 

   

Enterprise: This classification refers to the “Fortune 1000” type businesses that have their own on-premises data centers. Examples of companies in this space include Goldman Sachs, J.P. Morgan, Walmart and Cleveland Clinic. The enterprise segment represents approximately 70% of the data center business. We have found that the growth of the enterprise market, based on data centers and square footage, has generally been flat for the past three years.

 

   

Edge: These types of data centers are at the infancy stage of their development and will be utilized by all of the aforementioned categories in the future. These locations are decentralized by nature and located closer to where the data is being demanded (i.e., towards the edge of the network). This market is small today, but the opportunities for growth in this space are expected to increase as the proliferation of connected devices and data storage needs continue to grow in the future.

Our management estimates that approximately 70% of our revenues for the fiscal year ended December 31, 2018 are attributable to customers across the data center end market.

Communication networks: This space is comprised of wireline, wireless and broadband companies. These companies create content and are ultimately responsible for distributing voice, video and data to businesses and consumers. They deliver this data through an intricate network of wireline and wireless mediums. Additionally, some of these companies’ locations act as data centers where the data is delivered and also processed and stored. This sector has a generally low single digit growth profile. Our management estimates that approximately 20% of our revenues for the fiscal year ended December 31, 2018 are attributable to customers across the communication networks end market.

Commercial/Industrial: This space is comprised of those applications that are tied to a company’s critical systems. Examples include transportation, manufacturing, oil and gas, etc. These applications are growing in their need for intelligent infrastructure and may be regulated or need to pass some level of compliance. The growth in this area generally tracks Growth Domestic Product. Our management estimates that approximately 10% of our revenues for the fiscal year ended December 31, 2018 are attributable to customers across the commercial and industrial end market.

Our strategy

We strive to create value for our stockholders through organic growth and strategic acquisitions, lean initiatives to cut costs and the hiring and retaining of top talent. We believe the culture and values being instilled in the organization (such as acting with speed, transparency and focus on the customer) propel us to deliver value for all of our constituents.



 

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Our goal is to enable the vital applications of the digital world by anticipating and solving the needs of our customers in this increasingly connected global landscape. We expect to continue achieving growth and creating value through several strategic initiatives:

 

   

Customer centricity: Everything we do starts with the customer. Understanding our customers’ markets, needs and strategies enables significant and earlier engagement with such customers during the selling cycle. We have multiple touch points with customers through a product’s life cycle, which positions our organization to best address our customers’ critical application needs. This customer focused strategy aligns every team in our organization, from sales to engineering to supply chain.

 

   

Leadership in technology: We are on the forefront of technological development within our core businesses of critical digital infrastructure. We innovate at the individual product level in order to increase efficiency, reduce our product’s carbon footprint and enhance ease of use for our customers. Two examples of this technology leadership are our new eXL S1 power product and our DSE thermal product. Both of these offerings are leading products in the market from an efficiency, footprint and ease-of-use standpoint. Further, we are developing smart technology and continue to build an ecosystem that allows for interconnectivity between our products, our services and our customers. Additionally, our investment in data analytics and software will allow us and our customers to be smarter and more predictive around the critical digital infrastructure. In order to maintain our technology leadership, we will continue to invest in premier engineering talent and invest in developing next-gen cutting-edge technology.

 

   

Acquisition pipeline: We have in the past pursued, and intend in the future to pursue, acquisitions that will enhance and diversify our portfolio of offerings and capabilities. Given our existing diversified platform, we are able to target companies across a range of competencies and verticals. We will look for companies that: (1) increase our presence in the hyperscale/cloud, colocation and edge universe; (2) bolster our service and solutions platform; and (3) help leverage our technologies in adjacent markets such as energy storage. For example, our recent acquisitions of Geist, a leading manufacturer of rack power distribution units, and Energy Labs, a leading provider of direct and indirect air handling systems and modular data center solutions, will help to expand our hyperscale/cloud and colocation offerings, increase our solutions capabilities, and provide further edge offerings for our customers.

 

   

Continue to optimize our operational model and cost structure: We have in the past pursued, and intend in the future to pursue, opportunities to improve our operations and eliminate redundant and unnecessary costs. For example, we continue to build out the Vertiv Operating System to transform the business and deliver value to the customer. This system is rooted in always putting the customer first, building an outstanding culture, and maintaining an intense focus on continuously improving. The tools we utilize allow for lean implementation, better on-time delivery, direct and indirect supply chain saving and productivity improvements.

 

   

Grow and expand in key customers: Our key customer program focuses on those global and regional accounts that we believe most benefit from our value proposition. Many of these accounts are large cloud or colocation customers, as well as communication networks and vertical customers. We look to further expand our presence and opportunities with these clients as we believe their growth trajectories will outpace the traditional market growth.

 

   

Continue building a customer centered culture: We believe that in order to maintain our strong customer relationships, we must have a deeply customer centric culture; exhibit accountability; and act with speed and purpose in addressing customer needs.

Business Combination

On the Closing Date, Vertiv Holdings Co (formerly known as GS Acquisition Holdings Corp), consummated the Business Combination pursuant to that certain Merger Agreement, by and among the



 

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Company, Vertiv Holdings, the Vertiv Stockholder, the First Merger Sub and the Second Merger Sub. As contemplated by the Merger Agreement, (1) First Merger Sub merged with and into Vertiv Holdings, with Vertiv Holdings continuing as the surviving entity and (2) immediately following the First Merger and as part of the same overall transaction as the First Merger, Vertiv Holdings merged with and into Second Merger Sub, with Second Merger Sub continuing as the surviving entity and renamed “Vertiv Holdings, LLC.” As a result of the consummation of the Business Combination, (a) the Company directly owns all of the equity interests of Vertiv Holdings, LLC and indirectly owns the equity interests of its subsidiaries and (b) the Vertiv Stockholder, the sole equity owner of Vertiv Holdings prior to the Business Combination, now holds 118,261,955 shares of our Class A common stock. In connection with the Business Combination, the registrant changed its name from GS Acquisition Holdings Corp to “Vertiv Holdings Co”.

On February 6, 2020, the Company’s stockholders, at a special meeting of the Company, approved and adopted the Merger Agreement, and approved the Business Combination proposal and the other related proposals presented in the definitive proxy statement filed with the SEC on January 17, 2020 (the “Proxy Statement”).

The aggregate merger consideration paid by the Company in connection with the consummation of the Business Combination was approximately $1.5 billion (the “Merger Consideration”). The Merger Consideration was paid in a combination of cash and stock. The amount of cash consideration paid to the Vertiv Stockholder upon the consummation of the Business Combination was approximately $342 million. The remainder of the consideration paid to the Vertiv Stockholder upon the consummation of the Business Combination was Stock Consideration, consisting of approximately 118,261,955 million newly-issued shares of our Class A common stock, which shares were valued at $10.00 per share for purposes of determining the aggregate number of shares of our Class A common stock payable to the Vertiv Stockholder as part of the Merger Consideration. In addition, the Vertiv Stockholder is entitled to receive additional future cash consideration with respect to the Business Combination in the form of amounts payable under the Tax Receivable Agreement.

Concurrently with the execution of the Merger Agreement, the Company entered into the Subscription Agreements with the PIPE Investors, including the Subscribing Vertiv Executives, pursuant to which the PIPE Investors collectively subscribed for 123,900,000 shares of our Class A common stock for an aggregate purchase price equal to $1,239,000,000. The PIPE Investment was consummated in connection with the consummation of the Business Combination. See “Business Combination” for a summary of the Subscription Agreements. Each of the Initial Stockholders agreed to waive the anti-dilution adjustments provided for in GSAH’s Certificate of Incorporation, which were applicable to the founder shares. As a result of such waiver, the 17,250,000 founder shares automatically converted from shares of our Class B common stock into shares of our Class A common stock on a one-for-one basis upon the consummation of the Business Combination.

On the Closing Date, we entered into certain related agreements including the Tax Receivable Agreement, Amended and Restated Registration Rights Agreement and the Stockholders Agreement (each of which is described in the section titled “Business Combination”).



 

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The following diagram illustrates our structure following the consummation of the Business Combination:

 

 

LOGO

Recent Developments

To further our objective to explore future financing options to optimize our capital structure, including potential debt refinancing, on January 31, 2020, we commenced a process to refinance the Term Loan Facility and amend and extend the Asset-Based Revolving Credit Facility. The proposed refinancing transaction is expected to reduce our debt service requirements and leverage and to extend the maturity profile of our indebtedness. The proposed transaction is anticipated to close during the first quarter of 2020. As the terms of the proposed refinancing transaction have not been finalized, the structure, timing and anticipated impact are subject to change.

In connection with the proposed refinancing transaction, on January 31, 2020, we called all of our Existing Notes for conditional redemption on March 2, 2020, in accordance with the respective indentures. The redemptions are conditioned upon the completion of the proposed refinancing transactions on terms satisfactory to us and/or our affiliates. In addition, a total of $500,000 principal amount of 2024 Senior Notes were tendered in the change of control offer made in connection with the Business Combination and were repurchased on February 7, 2020.

On the Closing Date, we used a portion of the proceeds from the Business Combination, including the PIPE Investment, to repay $176 million of the outstanding indebtedness under the Asset-Based Revolving Credit Facility and approximately $1.29 billion of the outstanding indebtedness under the Term Loan Facility.

Emerging Growth Company

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements,



 

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and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.

We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of the IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the prior June 30th; and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. We currently anticipate losing our “emerging growth company” status at 2020 year end. References herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.

Risk Factors

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors”, that represent challenges that we face in connection with the successful implementation of our strategy and growth of our business.

Corporate Information

We were incorporated on April 25, 2016 as a Delaware corporation under the name “GS Acquisition Holdings Corp” and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On February 7, 2020, in connection with the consummation of the Business Combination, we changed our name to “Vertiv Holdings Co.” Our principal executive offices are located at 1050 Dearborn Drive, Columbus, Ohio, 43085, and our telephone number is (212) 902-1000. Our website is www.vertiv.com. The information found on, or that can be accessed from or that is hyperlinked to, our website is not part of this prospectus.



 

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THE OFFERING

We are registering the issuance by us of up to 33,533,303 shares of our Class A common stock that may be issued upon exercise of warrants to purchase Class A common stock, including the public warrants and the private placement warrants. We are also registering the resale by the Selling Holders or their permitted transferees of (i) up to 270,238,621 shares of Class A common stock, (ii) up to 10,606,666 warrants and (iii) 220,000 units. Any investment in the securities offered hereby is speculative and involves a high degree of risk. You should carefully consider the information set forth under “Risk Factors” on page 20 of this prospectus.

Issuance of Class A Common Stock

The following information is as of February 7, 2020 and does not give effect to issuances of our Class A common stock or warrants after such date, or the exercise of warrants after such date.

 

Shares of our Class A common stock to be issued upon exercise of all public warrants and private placement warrants

33,533,303 shares
 

 

Shares of our Class A common stock outstanding prior to exercise of all public warrants and private placement warrants

328,411,955 shares

 

Use of proceeds

We will receive up to an aggregate of approximately $385,632,984 from the exercise of all public warrants and private placement warrants assuming the exercise in full of all such warrants for cash. Unless we inform you otherwise in a prospectus supplement or free writing prospectus, we intend to use the net proceeds from the exercise of such warrants for general corporate purposes which may include acquisitions or other strategic investments or repayment of outstanding indebtedness.

Resale of Class A common stock, warrants and units

 

Shares of Class A common stock offered by the Selling Holders (including 10,533,333 shares of Class A common stock that may be issued upon exercise of the private placement warrants, 17,250,000 founder shares, 123,900,000 PIPE Shares, 118,261,955 Stock Consideration Shares and 293,333 shares of Class A common stock underlying the units that are Other Registrable Securities)

270,238,621 shares


 

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Table of Contents

Warrants offered by the Selling Holders (includes 10,533,333 private placement warrants and 73,333 public warrants underlying the units that are Other Registrable Securities)

10,606,666 warrants

 

Exercise Price

$11.50 per share, subject to adjustment as described herein

 

Redemption

The warrants are redeemable in certain circumstances. See “Description of Securities—Private Placement Warrants” for further discussion.

 

Units offered by the Selling Holders that are Other Registrable Securities

220,000 units, each unit consisting of one share of Class A common stock and one-third of one public warrant

 

Use of Proceeds

We will not receive any proceeds from the sale of the Class A common stock, warrants and units to be offered by the Selling Holders. With respect to shares of Class A common stock underlying the warrants, we will not receive any proceeds from such shares except with respect to amounts received by us upon exercise of such warrants to the extent such warrants are exercised for cash.

 

Lock-up Agreements

Each of (i) the founder shares, the private placement warrants and the Class A common stock issuable upon exercise of the private placement warrants that are owned by the Initial Stockholders and (ii) the Stock Consideration Shares owned by the Vertiv Stockholder are subject to certain restrictions on transfer until the termination of applicable lock-up periods. See “Business Combination—Related Agreements” for further discussion.

 

NYSE Ticker Symbols

Class A common stock: “VRT”

 

  Warrants: “VRT WS”

 

  Units: “VERT.U”


 

12


Table of Contents

SELECTED HISTORICAL FINANCIAL INFORMATION OF GSAH

The following tables summarize GSAH’s historical consolidated financial and other data for the periods and as of the dates indicated. GSAH’s balance sheet data as of December 31, 2018 and 2017 and statement of operations data for the fiscal years ended December 31, 2018 and 2017 are derived from GSAH’s audited financial statements included elsewhere in this prospectus. GSAH’s balance sheet data as of September 30, 2019 and statement of operations data for the nine months ended September 30, 2019 and 2018 are derived from GSAH’s unaudited financial statements included elsewhere in this prospectus.

The information is only a summary and should be read in conjunction with GSAH’s financial statements and related notes contained elsewhere in this prospectus. GSAH’s historical results are not necessarily indicative of future results, and the results for any interim period are not necessarily indicative of the results that may be expected for a full fiscal year. In connection with the Business Combination, Vertiv was determined to be the accounting acquirer.

 

     September 30, 2019
(Unaudited)
     December 31,
2018
     December 31,
2017
 

ASSETS

        

Current assets:

        

Cash

   $ 194,528      $ 835,544      $ —    

Prepaid expenses

     353,813        341,424        —    

Receivable from GS Sponsor LLC

     —          —          25,000  
  

 

 

    

 

 

    

 

 

 

Total current assets

     548,341        1,176,968        25,000  

Cash and cash equivalents held in Trust Account

     703,920,190        694,883,137        —    

Accrued dividends receivable held in Trust Account

     1,093,609        1,278,946        —    
  

 

 

    

 

 

    

 

 

 

Total assets

   $ 705,562,140      $ 697,339,051      $ 25,000  
  

 

 

    

 

 

    

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

        

Current liabilities:

        

Accounts payable

   $ 1,234,290      $ 644,208      $ 1,276  

Accrued offering costs

     —          538,881        —    

Income tax payable

     214        94,439        —    
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     1,234,504        1,277,528        1,276  

Deferred underwriting compensation

     24,150,000        24,150,000        —    
  

 

 

    

 

 

    

 

 

 

Total liabilities

     25,384,504        25,427,528        1,276  
  

 

 

    

 

 

    

 

 

 

Commitments and contingencies

        

Class A common stock subject to possible redemption; 66,079,922 and 66,100,835 shares, at redemption value at September 30, 2019 and December 31, 2018, respectively

     675,177,635        666,911,522        —    

Stockholders’ equity:

        

Preferred stock, $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding

     —          —          —    

Class A common stock, $0.0001 par value, 500,000,000 shares authorized, 2,920,078 and 2,899,165 shares issued and outstanding (excluding 66,079,922 and 66,100,835 shares subject to possible redemption), at September 30, 2019 and December 31, 2018, respectively

     292        290        —    

Class B common stock, $0.0001 par value, 20,000,000 shares authorized, 17,250,000 issued and outstanding

     1,725        1,725        1,725  

Additional paid-in capital

     —          271,932        326,693  

Retained earnings (Accumulated deficit)

     4,997,984        4,726,054        (304,694
  

 

 

    

 

 

    

 

 

 

Total stockholders’ equity

     5,000,001        5,000,001        23,724  
  

 

 

    

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 705,562,140      $ 697,339,051      $ 25,000  


 

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Table of Contents
     Nine Months
Ended
September 30,
2019
    Nine Months
Ended
September 30,
2018
 

Revenues

   $ —       $ —    

Dividend income

     11,311,397       3,769,609  

General and administrative expenses

     (1,733,276     (376,095
  

 

 

   

 

 

 

Income before income tax provision

     9,578,121       3,393,514  

Provision for income tax

     (2,012,008     (711,635
  

 

 

   

 

 

 

Net Income

     7,566,113     $ 2,681,879  
  

 

 

   

 

 

 

Weighted average number of shares outstanding of Class A common stock:

     69,000,000       69,000,000  
  

 

 

   

 

 

 

Basic and diluted net income per share, Class A

   $ 0.09     $ 0.03  
  

 

 

   

 

 

 

Weighted average number of shares outstanding of Class B common stock:

     17,250,000       17,250,000  
  

 

 

   

 

 

 

Basic and diluted net income per share, Class B

   $ 0.09     $ 0.03  
  

 

 

   

 

 

 

 

     Year Ended
December 31,
2018
    Year Ended
December 31,
2017
 

Revenues

   $ —       $ —    

Dividend income

     7,407,083       —    

General and administrative expenses

     (1,036,896     (1,276
  

 

 

   

 

 

 

Income (loss) before income tax (provision) benefit

     6,370,187       (1,276

Provision for income tax

     (1,339,439     —    
  

 

 

   

 

 

 

Net Income/ (loss)

   $ 5,030,748     $ (1,276

Weighted average shares outstanding of Class A common stock

     69,000,000       —    
  

 

 

   

 

 

 

Basic and diluted net income per share, Class A

   $ 0.06     $ —    
  

 

 

   

 

 

 

Weighted average shares outstanding of Class B common stock

     17,250,000       17,250,000  
  

 

 

   

 

 

 

Basic and diluted net income per share, Class B

   $ 0.06     $ (0.00
  

 

 

   

 

 

 


 

14


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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF VERTIV HOLDINGS

The following tables summarize Vertiv’s selected historical consolidated and combined financial data for the periods and as of the dates indicated. During 2017, Vertiv elected to change its fiscal year end from September 30 to December 31. The change became effective at the end of the period ended December 31, 2016. Unless otherwise noted, all references to “fiscal” in this report refer to the twelve-month fiscal year, which as of and prior to September 30, 2016 ended on September 30, and beginning after December 31, 2016 ends on December 31 of each year. The selected financial data presented in the below table for the period prior to the Separation, including the summary combined statement of earnings (loss) data for the two-month period ended November 30, 2016 and the fiscal years ended September 30, 2016, 2015, and 2014 are derived from the combined financial statements for the Network Power business of Emerson (or Vertiv Predecessor), Vertiv’s accounting predecessor, and is referred to in this prospectus. as the “Predecessor” period. The selected financial data presented in the below table for the period following the Separation, including the summary consolidated statement of earnings (loss) data for the nine months ended September 30, 2019 and 2018, for the years ended December 31, 2018 and 2017, and the one-month period ended December 31, 2016 and the consolidated balance sheet data as of September 30, 2019 and 2018, December 31, 2018, 2017 and 2016, are each derived from Vertiv’s consolidated financial statements and is referred to in this prospectus as the “Successor” period. The data should be read in conjunction with the consolidated financial statements, related notes, and other financial information included herein. Vertiv’s historical results for any prior period are not necessarily indicative of results Vertiv may expect or achieve in any future period. In connection with the Business Combination, Vertiv was determined to be the accounting acquirer.

The selected historical consolidated and combined financial data set forth below should be read in conjunction with, and are qualified by reference to, “Vertiv Holdings Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Vertiv Holdings consolidated and combined financial statements and related notes thereto included elsewhere in this prospectus.

 

    Successor           Predecessor  

(in millions)

  Nine months
ended
September 30,
2019
    Nine months
ended
September 30,
2018
    Year ended
December 31,
2018
    Year ended
December 31,
2017
    One month
ended
December 31,
2016
          Two months
ended
November 30,
2016
    Year ended
September 30,
2016
    Year ended
September 30,
2015
    Year ended
September 30,
2014
 

Consolidated and Combined Statement of Earnings Data

                     

Net sales

                     

Net sales

  $ 3,259.7     $ 3,114.0     $ 4,285.6     $ 3,879.4     $ 301.7         $ 566.2     $ 3,943.5     $ 4,025.1     $ 4,461.8  

Costs and expenses

                     

Cost of sales

    2,193.9       2,063.4       2,865.2       2,566.8       240.3           369.3       2,532.6       2,669.1       2,874.9  

Selling, General and administrative expenses

    809.0       920.4       1,223.8       1,086.0       162.3           164.3       980.8       1,009.7       1,079.8  

Goodwill impairment

    —         —         —         —         —             —         57.0       154.0       508.0  

Other deductions, net

    98.6       166.2       178.8       254.4       42.5           14.7       125.9       208.0       153.0  

Interest expense (income)

    234.2       213.5       288.8       379.3       27.8           0.3       (3.5     (3.8     (2.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) from continuing operations before income taxes

    (76.0     (249.5     (271.0     (407.1     (171.2         17.6       250.7       (11.9     (151.9

Income tax expense (benefit)

    30.9       32.2       49.9       (19.7     (4.3         24.3       140.1       100.3       140.5  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

       

 

 

   

 

 

   

 

 

   

 

 

 


 

15


Table of Contents
    Successor           Predecessor  

(in millions)

  Nine months
ended
September 30,
2019
    Nine months
ended
September 30,
2018
    Year ended
December 31,
2018
    Year ended
December 31,
2017
    One month
ended
December 31,
2016
          Two months
ended
November 30,
2016
    Year ended
September 30,
2016
    Year ended
September 30,
2015
    Year ended
September 30,
2014
 

Earnings (loss) from continuing operations

    (106.9     (281.7     (320.9     (387.4     (166.9         (6.7     110.6       (112.2     (292.4

Earnings (loss) from discontinued operations, net of income taxes

    —         7.4       6.9       17.8       (4.3         7.2       47.1       50.4       56.8  

Net earnings (loss)

  $ (106.9   $ (274.3   $ (314.0   $ (369.6   $ (171.2       $ 0.5     $ 157.7     $ (61.8   $ (235.6

 

    Successor           Predecessor  

(in millions)

  Nine months
ended
September 30,
2019
    Nine months
ended
September 30,
2018
    Year ended
December 31,
2018
    Year ended
December 31,
2017
    One month
ended
December 31,
2016
          Two months
ended
November 30,
2016
    Year ended
September 30,
2016
    Year ended
September 30,
2015
    Year ended
September 30,
2014
 

Consolidated and Combined Cash Flow Data:

                     

Net cash provided by (used for) operating activities

  $ (56.6   $ (251.6   $ (221.9   $ (49.6   $ 59.8         $ (37.2   $ 370.2     $ 340.5     $ 441.8  

Net cash provided by (used for) investing activities

    (38.4     (192.6     (207.7     1,058.1       (3,925.2         (10.5     (30.2     (46.4     (103.8

Net cash provided by (used for) financing activities

    33.8       145.8       245.1       (874.1     4,106.6           (136.8     (199.1     (292.9     (295.3

Purchase of property, plant and equipment

    (27.9     (45.0     (64.6     (36.7     (4.7         (8.5     (34.0     (44.9     (54.6

Consolidated and Combined Balance Sheet Data (at end of period):

                     

Cash

  $ 149.3     $ 99.4     $ 215.1     $ 388.0     $ 249.6         $ 92.3     $ 272.0     $ 131.6     $ 157.8  

Working capital(1)

    492.0       433.8       488.9       539.2       444.1           456.8       585.4       507.1       640.8  

Total current assets

    1,963.3       1,927.2       2,095.3       1,988.1       1,935.9           1,805.9       1,989.1       1,812.2       2,049.5  

Property, plant and equipment, net

    415.2       440.2       441.7       462.8       444.5           299.7       308.1       331.1       373.3  

Total assets

    4,611.2       4,661.2       4,794.4       4,808.5       5,859.3           4,456.7       4,709.0       4,745.9       5,427.8  

Total equity

    (696.2     (482.9     (540.3     (129.6     1,120.0           2,858.1       3,068.3       3,162.4       3,707.3  

Total debt

    3,479.5       3,324.2       3,427.8       3,159.6       2,916.1           —         —         —         N/A  


 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined balance sheet as of September 30, 2019 and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2018 and the nine months ended September 30, 2019 present the historical financial statements of Vertiv Holdings, adjusted to reflect the Business Combination. GSAH and Vertiv shall collectively be referred to herein as the “Companies.” The Companies, subsequent to the Business Combination, shall be referred to herein as the “Company.”

The unaudited pro forma condensed combined balance sheet as of September 30, 2019 assumes that the Business Combination was completed on September 30, 2019. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2018 and for the nine months ended September 30, 2019 give pro forma effect to the Business Combination as if it had occurred on January 1, 2018.

GSAH’s balances have been classified consistently with Vertiv’s presentation. The unaudited pro forma condensed combined balance sheet and statement of operations as of and for the nine months ended September 30, 2019 were derived from Vertiv’s unaudited condensed consolidated financial statements as of and for the nine months ended September 30, 2019 and GSAH’s unaudited condensed consolidated financial statements as of and for the nine months ended September 30, 2019. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2018 was derived from Vertiv’s audited consolidated statement of operations for the year ended December 31, 2018 and GSAH’s audited consolidated statement of operations for the year ended December 31, 2018.

On December 10, 2019, GSAH entered into the Merger Agreement with First Merger Sub, Second Merger Sub, Vertiv Holdings and the Vertiv Stockholder, and on February 7, 2020, the Business Combination was consummated. The unaudited pro forma condensed combined financial information does not purport to represent our actual results of operations giving effect to the Business Combination or to project our results of operations that may be achieved after the Business Combination.

After giving effect to the Business Combination, the Company owns, directly or indirectly, all of the assets of Vertiv and its subsidiaries, and the Vertiv Stockholder holds a portion of the Company’s Class A common stock. Vertiv is considered the accounting acquirer, as further discussed in “Unaudited Pro Forma Condensed Combined Financial InformationNote 2—Basis of the Pro Forma Presentation.”



 

17


Table of Contents

See “Unaudited Pro Forma Condensed Combined Financial Information” for more details.

Selected Unaudited Pro Forma Financial Information

(Dollars in millions except per share data)

 

     Pro Forma
Combined
 

Statement of Operations Data—Nine Months Ended September 30, 2019

  

Net Sales

   $ 3,259.7  

Loss from continuing operations

   $ 23.4  

Pro Forma weighted average common shares outstanding—basic and diluted

     328,411,955  

Pro Forma net income (loss) per share basic and diluted

   $ (0.07

Statement of Operations Data—Year Ended December 31, 2018

  

Net Sales

   $ 4,285.6  

Loss from continuing operations

   $ 220.1  

Pro Forma weighted average common shares outstanding—basic and diluted

     328,411,955  

Pro Forma net income (loss) per share basic and diluted

   $ (0.67

Balance Sheet Data—As of September 30, 2019

  

Total current assets

   $ 1,963.9  

Total assets

   $ 4,611.8  

Total current liabilities

   $ 1,472.5  

Total liabilities

   $ 4,001.4  

Total equity

   $ 610.4  

COMPARATIVE PER SHARE INFORMATION

The following table sets forth:

 

   

historical per share information of GSAH for the year ended December 31, 2018 and for the nine months ended September 30, 2019; and

 

   

unaudited pro forma per share information of the Company for the fiscal year ended December 31, 2018 and the nine months ended September 30, 2019, after giving effect to the Business Combination.

The pro forma book value, net income (loss) and cash dividends per share information reflect the Business Combination contemplated by the Merger Agreement as if it had occurred on January 1, 2018. The following table is also based on the assumption that there are no adjustments for the outstanding warrants issued by GSAH as such securities are not exercisable until 30 days after the closing of the Business Combination.

The historical information should be read in conjunction with “Selected Consolidated Historical Financial Information of Vertiv Holdings,” “Selected Historical Financial Information of GSAH,” and “Vertiv Holdings’ Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this prospectus and the audited historical financial statements and the related notes of Vertiv Holdings and GSAH contained elsewhere in this prospectus. The unaudited pro forma condensed combined share information is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial information and related notes included elsewhere in this prospectus. The unaudited pro forma condensed combined net income per share information below does not purport to represent our actual results of operations giving effect to the Business Combination or to project our results of operations that may be achieved after the Business Combination. The unaudited pro forma book value per share information below does not purport to



 

18


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represent our actual book value giving effect to the Business Combination nor the book value per share for any future date or period.

 

     Vertiv
historical(2)
     GSAH
historical
     Pro Forma
Combined
 

As of and for the Nine months ended September 30, 2019

        

Book value per share(1)

     n/a      $ 0.07      $ 1.81  

Net income (loss) per share—basic and diluted

     n/a        0.09        (0.07

Weighted average shares outstanding—basic and diluted

     n/a        69,000,000        328,411,955  

As of and for the Twelve months ended December 31, 2018

        

Net income (loss) per share—basic and diluted

     n/a        0.06        (0.67

Weighted average shares outstanding—basic and diluted

     n/a        69,000,000        328,411,955  

 

(1)

Book value per share = Total equity / Total basic and diluted outstanding shares.

(2)

Historically, as a private limited liability company, Vertiv has not calculated net earnings (loss) per share.



 

19


Table of Contents

RISK FACTORS

An investment in our securities involves risks and uncertainties. You should carefully consider the following risks as well as the other information included in this prospectus, including “Cautionary Statement About Regarding Forward-Looking Statements,” “Selected Consolidated Historical and Pro Forma Financial Information,” “Vertiv Holdings’ Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto included elsewhere in this prospectus, before investing in our securities. We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially adversely affect our operations. Any of the following risks could materially and adversely affect our business, financial condition, results of operations or prospects. However, the selected risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition, results of operations or prospects. In such a case, the trading price of our securities could decline and you may lose all or part of your investment in us. Unless the context otherwise requires, all references in this subsection to the “Company,” “we,” “us” or “our” refer to Vertiv Holdings Co and its consolidated subsidiaries following the Business Combination, other than certain historical information which refers to the business of Vertiv prior to the consummation of the Business Combination.

Risks Related to Our Business

Economic weakness and uncertainty could adversely impact our business, results of operations and financial condition.

Worldwide economic conditions impact demand for our offerings, and economic weakness and uncertainty in global, regional or local areas may result in decreased orders, revenue, gross margin and earnings. For example, our business has been impacted from time to time in the past by macroeconomic weakness in the United States and various regions outside of the United States. Any such economic weakness and uncertainty may result in:

 

   

capital spending constraints for customers and, as a result, reduced demand for our offerings;

 

   

increased price competition for our offerings;

 

   

excess and obsolete inventories;

 

   

supply constraints if the number of suppliers decreases due to financial hardship;

 

   

restricted access to capital markets and financing, resulting in delayed or missed payments to us and additional bad debt expense;

 

   

excess facilities and manufacturing capacity;

 

   

higher overhead costs as a percentage of revenue and higher interest expense;

 

   

loss of orders, including as a result of corruption, the risk of which is increased by a weak economic climate;

 

   

significant declines in the value of foreign currencies relative to the U.S. dollar, impacting our revenues and results of operations;

 

   

financial difficulty for our customers; and

 

   

increased difficulty in forecasting business activity for us, customers, the sales channel and vendors.

We rely on the continued growth of our customers’ networks, in particular data center and communication networks, and any decreases in demand in these networks could lead to a decrease in our offerings.

A substantial portion of our business depends on the continued growth of our customers’ data centers and communication networks. If these networks do not continue to grow, whether as a result of changes in the

 

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economy, capital spending, building capacity in excess of demand, delays in receiving required permits and approvals, or otherwise overall demand could decrease for our offerings, which would have an adverse effect on our business, results of operations and financial condition.

If we fail to anticipate technology shifts, market needs and opportunities, and fail to develop appropriate products, product enhancements and services in a timely manner to meet those changes, we may not be able to compete effectively against our global competitors and, as a result, our ability to generate revenues will suffer.

We believe that our future success will depend in part upon our ability to anticipate technology shifts and to enhance and develop new products and services that meet or anticipate such technology changes. Any such developments will require continued investment in engineering, capital equipment, marketing, customer service and technical support. For example, we will need to anticipate potential market shifts to alternative power architectures, cooling technologies and energy storage that could diminish the demand for our existing offerings or affect our margins.

Also, our primary global competitors are sophisticated companies with significant resources that may develop superior products and services or may adapt more quickly to new technologies and technology shifts, industry changes or evolving customer requirements. If we fail to anticipate technology changes, shifting market needs or keep pace with our competitors’ products, or if we fail to develop and introduce new products or enhancements in a timely manner, we may lose customers and experience decreased or delayed market acceptance and sales of present and future products and our ability to generate revenues will suffer.

The long sales cycles for certain of our products and solutions offerings, as well as unpredictable placing or canceling of customer orders, particularly large orders, may cause our revenues and operating results to vary significantly from quarter-to-quarter, which could make our future operational results less predictable.

A customer’s decision to purchase certain of our products or solutions, particularly products new to the market or long-term end-to-end solutions, may involve a lengthy contracting, design and qualification process. In particular, customers deciding on the design and implementation of large deployments may have lengthy and unpredictable procurement processes that may delay or impact expected future orders. As a result, the order booking and sales recognition process may be uncertain and unpredictable, with some customers placing large orders with short lead times on little advance notice and others requiring lengthy, open-ended processes that may change depending on global or regional economic weakness. This may cause our revenues and operating results to vary unexpectedly from quarter-to-quarter, making our future operational results less predictable.

Any disruption or any consolidation of our customers’ markets could result in declines in the sales volume and prices of our products.

The disruption of our customers’ markets could occur due to a number of factors, including government policy changes, industry consolidations or the shifting of market size and power among customers. Such consolidations or other disruptions may result in certain parties gaining additional purchasing leverage and, consequently, increasing the product pricing pressures facing our business. Such changes could impact spending as customers evolve their strategies or integrate acquired operations. For example, if fewer customers exist due to consolidation, the loss of a major customer could have a material impact on results not anticipated in a customer marketplace composed of more numerous participants. Any reduction in customer spending on technological development as a result of these and other factors could have an adverse effect on our business, results of operations and financial condition. See also “—Future legislation and regulation, both in the United States and abroad, governing the Internet services, other related communications services and information technologies could disrupt our customers’ markets resulting in declines in sales volume and prices of our products and otherwise have an adverse effect on our business operations.

 

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Large companies, such as communication network and hyperscale/cloud and colocation data center providers, often require more favorable terms and conditions in our contracts with such companies that could result in downward pricing pressures on our business.

Large companies, such as communication network and hyperscale/cloud and colocation data center providers, comprise a portion of our customer base and generally have greater purchasing power than smaller entities. Accordingly, these customers often require more favorable terms and conditions in contracts from suppliers including us. Consolidation among such large customers can further increase their buying power and ability to require onerous terms. See “—Any disruption or any consolidation of our customers’ markets could result in declines in the sales volume and prices of our products.” In addition, these customers may impose substantial penalties for any product or service failures caused by us. As we seek to sell more products to such customers, we may be required to agree to such terms and conditions more frequently, which may include terms that affect the timing of our cash flows and ability to recognize revenue, and could have an adverse effect on our business, results of operations and financial condition.

We derive a portion of our revenue from contracts with governmental customers. Such customers and their respective agencies are subject to increased pressures to reduce expenses. Contracts with governmental customers may also contain additional or more onerous terms and conditions that are not common among commercial customers. In addition, as a result of our contracts with governmental customers, we are at risk of being subject to audits, investigations, sanctions and penalties by such governments, which could result in various civil and criminal penalties, administrative sanctions, and fines and suspensions.

We derive a portion of our revenue from contracts with governmental customers, including the U.S., state and local governments. There is increased pressure on such governmental customers and their respective agencies to reduce spending and some of our contracts at the state and local levels are subject to government funding authorizations. These factors combine to potentially limit the revenue we derive from government contracts.

Additionally, government contracts are generally subject to audits and investigations which could result in various civil and criminal penalties and administrative sanctions, including termination of contracts, refund of a portion of fees received, forfeiture of profits, suspension of payments, fines and suspensions or debarment from future government business. Such contracts are also subject to various laws and regulations that apply to doing business with governments. The laws relating to government contracts differ from other commercial contracting laws and our government contracts may contain pricing and other terms and conditions that are less favorable to the Company than those in commercial contracts.

We have, and we intend to continue pursuing, long-term, fixed-price contracts (including long-term, turnkey projects). Our failure to mitigate certain risks associated with our long-term, fixed-price contracts (including long-term, turnkey projects) may result in excess costs and penalties.

We have, and we intend to continue pursuing, long-term, fixed-price contracts (including long-term, turnkey projects). These contracts and projects have a duration greater than twelve months. Such contracts and projects involve substantial risks, which may result in excess costs and penalties, and include but are not limited to:

 

   

unanticipated technical problems with equipment, requiring us to incur added expenses to remedy such problems;

 

   

changes in costs or shortages of components, materials, labor or construction equipment;

 

   

difficulties in obtaining required governmental permits or approvals;

 

   

project modifications and changes to the scope of work resulting in unanticipated costs;

 

   

delays caused by local weather or other conditions beyond our control;

 

   

changes in regulations, permits or government policy;

 

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the failure of suppliers, subcontractors or consortium partners to perform; and

 

   

penalties, if we cannot complete all or portions of the project within contracted time limits and performance levels.

Our failure to mitigate these risks may result in excess costs and penalties and may have an adverse effect on our results of operations and financial condition.

System security risks could disrupt our operations, and any such disruption could reduce our revenue, increase our expenses, damage our reputation and adversely impact our performance.

We rely on our information systems and the information systems of a variety of third parties for processing customer orders, shipping products, billing our customers, tracking inventory, supporting finance and accounting functions, financial statement preparation, payroll services, benefit administration and other general aspects of our business. Our information systems or those of our third-party providers may be vulnerable to attack or breach. Any such attack or breach could compromise such information systems, resulting in fraud, ransom attack or theft of proprietary or sensitive information which could be accessed, publicly disclosed, misused, stolen or lost. This could impede our sales, manufacturing, distribution or other critical functions and the financial costs we could incur to eliminate or alleviate these security risks could be significant and may be difficult to anticipate or measure. Moreover, such a breach could cause reputational and financial harm and subject us to liability to our customers, suppliers, business partners or any affected individual.

In addition, the products we produce or elements of such products that we procure from third parties may contain defects or weaknesses in design, architecture or manufacture, which could lead to system security vulnerabilities in our products and compromise the network security of our customers. If an actual or perceived breach of network security occurs, regardless of whether the breach is attributable to our products or services, the market perception of the effectiveness of our products or services could be harmed.

Implementations of new information systems and enhancements to our current systems may be costly and disruptive to our operations.

We recently commenced the implementation of new information systems, including enhancement to our enterprise resource plan, human capital management, and product lifecycle management systems. The implementation of new information systems and enhancements to current systems may be costly and disruptive to our operations. Any problems, disruptions, delays or other issues in the design and implementation of these systems or enhancements could adversely impact our ability to process customer orders, ship products, provide service and support to our customers, bill and collect in a timely manner from our customers, fulfill contractual obligations, accurately record and transfer information, recognize revenue, file securities, governance and compliance reports in a timely manner or otherwise run our business. If we are unable to successfully design and implement these new systems, enhancements and processes as planned, or if the implementation of these systems and processes is more lengthy or costly than anticipated, our business, results of operations and financial condition could be negatively impacted.

Failure to properly manage our supply chain and inventory could result in higher costs of production and delays in fulfilling customer orders, excess or obsolete materials or components, labor disruptions or shortages and delays in production.

Our operations, particularly our manufacturing and service operations, depend on our ability to accurately anticipate both our needs, including raw materials, components, products and services, from third-party suppliers, and such suppliers’ ability to timely deliver the quantities and quality required at reasonable prices. We have a large number of providers to support our global operations and breadth of offerings. In addition, certain of our suppliers are also competitors with us in one or more parts of our business and those suppliers may decide to

 

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discontinue business with us. Other supply chain risks that we could face include, but are not limited to, the following:

 

   

Volatility in the supply or price of raw materials. Our products rely on a variety of raw materials and components, including steel, copper and aluminum and electronic components. We may experience a shortage of, or a delay in receiving, such materials or components as a result of strong demand, supplier capacity constraints or other operational disruptions, restrictions on use of materials or components subject to our governance and compliance requirements, disputes with suppliers or problems in transitioning to new suppliers. Moreover, prices for some of these materials and components have historically been volatile and unpredictable, and such volatility is expected to continue. Ongoing supply issues may require us to reengineer some offerings, which could result in further costs and delays. If we are unable to secure necessary supplies at reasonable prices or acceptable quality, we may be unable to manufacture products, fulfill service orders or otherwise operate our business. We may also be unable to offset unexpected increases in material and component costs with our own price increases without suffering reduced volumes, revenues or operating income.

 

   

Contractual terms. As a result of long-term price or purchase commitments in contracts with our suppliers, we may be obligated to purchase materials, components or services at prices higher than those available in the current market, which may put us at a disadvantage to competitors who have access to components or services at lower prices, impact our gross margin, and, if these issues impact demand, may result in additional charges for inventory obsolescence. In addition, to secure the supply of certain materials and components on favorable terms, we may make strategic purchases of materials and components in advance or enter into non-cancelable commitments. If we fail to anticipate demand properly, we may have an oversupply which could result in excess or obsolete materials or components.

 

   

Contingent workers. In some locations, we rely on third-party suppliers for the provision of contingent workers, and our failure to manage such workers effectively could adversely impact our results of operations. We may in the future be exposed to various legal claims relating to the status of contingent workers. We may also be subject to labor shortages, oversupply, or fixed contractual terms relating to the contingent workforce, and our ability to manage the size of, and costs for, such contingent workforce may be further constrained by local laws or future changes to such laws. In addition, our customers may impose obligations on us with regard to our workforce and working conditions.

 

   

Single-source suppliers. We obtain certain materials or components from single-source suppliers due to technology, availability, price, quality or other considerations. Replacing a single-source supplier could delay production of some products because replacement suppliers, if available, may be subject to capacity constraints or other output limitations.

Any of these risks could have an adverse effect on our results of operations and financial condition.

In addition, our operations depend upon disciplined inventory management, as we balance the need to maintain strategic inventory levels to ensure competitive lead times against the risk of inventory obsolescence because of rapidly changing technology and customer requirements. Excess or obsolete inventory, including that procured pursuant to an inaccurate customer forecast, would result in a write-off of such inventory, causing an increase in costs of goods sold and a decline in our gross margins.

The areas in which we provide our offerings are highly competitive, and we experience competitive pressures from numerous and varied competitors.

We encounter competition from numerous and varied competitors in all areas of our business on a global and regional basis, and our competitors have targeted, and are expected to continue targeting, our primary areas of operation. We compete with such competitors primarily on the basis of reliability, quality, price, service and customer relationships. A significant element of our competitive strategy is focused on delivering high-quality

 

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products and solutions at the best relative global cost. If our products, services, and cost structure do not enable us to compete successfully based on any of those criteria, we may experience a decline in product sales and a corresponding loss of customers due to their selection of a competitor.

Our competitors, any of which could introduce new technologies or business models that disrupt significant portions of our markets and cause our customers to move a material portion of their business away from us to such competitors, include:

 

   

Large-scale, global competitors with broad, sometimes larger, product portfolios and service offerings. These competitors may have greater financial, technical and marketing resources available to them compared to the resources allocated to our products and services that compete against their products and services. Competitors within this category include Schneider Electric, S.E. and Eaton Corporation Plc, each of which have a large, global presence and compete directly in the markets in which we operate. Industry consolidation may also impact the competitive landscape by creating larger, more homogeneous and potentially stronger competitors in the markets in which we operate.

 

   

Offering-specific competitors with products and services that compete globally but with a limited set of product offerings. These competitors may be able to focus more closely on a segment of the market and be able to apply targeted financial, technical and marketing resources in ways that we cannot, potentially leading to stronger brand recognition and more competitive pricing.

 

   

Regional or country-level competitors that compete with us in a limited geographic area.

We may not realize the expected benefits from any rationalization and improvement efforts that we have taken or may take in the future.

We are continuously evaluating, considering and implementing possible rationalization and realignment initiatives to reduce our overall cost base and improve efficiency. There can be no assurance that we will fully realize the benefits of such efforts that we have taken or will take in the future within the expected time frame, or at all, and we may incur additional and/or unexpected costs to realize them. Further, we may not be able to sustain any achieved benefits in the future. In addition, these actions and potential future efforts could yield other unintended consequences, such as distraction of management and employees, business disruption, reduced employee morale and productivity, and unexpected employee attrition, including the inability to attract or retain key personnel. If we fail to achieve the expected benefits of any rationalization or realignment initiatives and improvement efforts, or if other unforeseen events occur in connection with such efforts, our business, results of operations and financial condition could be negatively impacted.

Disruption of, or consolidation or changes in, the markets or operating models of our independent sales representatives, distributors and original equipment manufacturers could have a material adverse effect on our results of operations.

We rely, in part, on independent sales representatives, distributors and original equipment manufacturers for the distribution of our products and services, some of whom operate on an exclusive basis. If these third parties’ financial condition or operations weaken, including as a result of a shift away from the go-to-market operating model they currently follow, and they are unable to successfully market and sell our products, our revenue and gross margins could be adversely affected. In addition, if there are disruptions or consolidation in their markets, such parties may be able to improve their negotiating position and renegotiate historical terms and agreements for the distribution of our products or terminate relationships with us in favor of our competitors. Changes in the negotiating position of such third parties in future periods could have an adverse effect on our results of operations.

 

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If we are unable to obtain performance and other guarantees from financial institutions, we may be prevented from bidding on, or obtaining, certain contracts, or our costs with respect to such contracts could be higher.

In accordance with industry practice for large data center construction opportunities, we are required to provide guarantees, including bid-bonds, advance payment and performance guarantees for our performance and project completion dates. Some customers require these guarantees to be issued by a financial institution, and historic global financial conditions have in the past, and may in the future, make it more difficult and expensive to obtain these guarantees. If, in the future, we cannot obtain such guarantees on commercially reasonable terms or at all, we could be prevented from bidding on, or obtaining, such large construction contracts, or our costs for such contracts could be higher and, in either case, could have an adverse effect on our business, results of operations and financial condition.

We may not realize all of the sales expected from our backlog of orders and contracts.

Our backlog consists of the value of product and service orders for which we have received a customer purchase order or purchase commitment and which have not yet been delivered. As of September 30, 2019 and December 31, 2018, our estimated combined order backlog was approximately $1,400.8 million and $1,502.0 million, respectively. The vast majority of our combined backlog is considered firm and expected to be delivered within one year. Our customers have the right in some circumstances, usually with penalties or termination consequences, to reduce or defer firm orders in backlog. If customers terminate, reduce or defer firm orders, whether due to fluctuations in their business needs or purchasing budgets or other reasons, our sales will be adversely affected and we may not realize the revenue we expect to generate from our backlog or, if realized, may not result in profitable revenue. More generally, we do not believe that our backlog estimates as of any date are indicative of revenues for any future period.

Our global operations and entity structure result in a complex tax structure where we are subject to income and other taxes in the United States and numerous foreign jurisdictions. Unanticipated changes in our tax provisions, variability of our quarterly and annual effective tax rate, the adoption of new tax legislation or exposure to additional tax liabilities could impact our financial performance.

Our global operations and entity structure result in a complex tax structure where we are subject to income and other taxes in the United States and numerous foreign jurisdictions. Variability in the mix and profitability of domestic and international activities, identification and resolution of various tax uncertainties, changes in tax laws and rates or other regulatory actions regarding taxes, and the extent to which we are able to realize net operating loss and other carryforwards included in deferred tax assets and avoid potential adverse outcomes included in deferred tax liabilities, among other matters, may significantly impact our effective income tax rate in the future. Our effective tax rate in any given financial reporting period may be materially impacted by mix and level of earnings or losses by jurisdiction as well as the discrete recognition of taxable events and exposures.

Future legislation and regulation, both in the United States and abroad, governing the Internet services, other related communications services and information technologies could disrupt our customers’ markets resulting in declines in sales volume and prices of our products and otherwise have an adverse effect on our business operations.

Various laws and governmental regulations, both in the United States and abroad, governing Internet related services, related communications services and information technologies remain largely unsettled, even in areas where there has been some legislative action. For example, in the United States regulations governing aspects of fixed broadband networks and wireless networks may change as a result of proposals regarding net neutrality and government regulation of the Internet, which could impact our communication networks customers. There may also be forthcoming regulation in the United States in the areas of cybersecurity, data privacy and data security, any of which could impact us and our customers. Similarly, data privacy regulations outside of the United States continue to evolve. Future legislation could impose additional costs on our business, disrupt our customers’ markets or require us to make changes in our operations which could adversely affect our operations.

 

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Any failure of our offerings could subject us to substantial liability, including product liability claims, which could damage our reputation or the reputation of one or more of our brands.

The offerings that we provide are complex, and our regular testing and quality control efforts may not be effective in controlling or detecting all quality issues or errors, particularly with respect to faulty components manufactured by third parties. Defects could expose us to product warranty claims, including substantial expense for the recall and repair or replacement of a product or component, and product liability claims, including liability for personal injury or property damage. We are not generally able to limit or exclude liability for personal injury or property damage to third parties under the laws of most jurisdictions in which we do business and, in the event of such incident, we could spend significant time, resources and money to resolve any such claim. We may be required to pay for losses or injuries purportedly caused by the design, manufacture, installation or operation of our products or by solutions performed by us or third parties.

An inability to cure a product defect could result in the failure of a product line, temporary or permanent withdrawal from a product or market, delays in customer payments or refusals by our customers to make such payments, increased inventory costs, product reengineering expenses and our customers’ inability to operate their enterprises. Such defects could also negatively impact customer satisfaction and sentiment, generate adverse publicity, reduce future sales opportunities and damage our reputation or the reputation of one or more of our brands. Any of these outcomes could have an adverse effect on our results of operations and financial condition.

In order to successfully operate as an independent public company and implement our business plans, we must identify, attract, develop, train, motivate and retain key employees, and failure to do so could seriously harm us.

In order to successfully operate as an independent public company and implement our business plans, we must identify, attract, develop, motivate, train and retain key employees, including qualified executives, management, engineering, sales, marketing, IT support and service personnel. The market for such individuals may be highly competitive. Attracting and retaining key employees in a competitive marketplace requires us to provide a competitive compensation package, which often includes cash- and equity-based compensation. If our total compensation package is not viewed as competitive, our ability to attract, motivate and retain key employees could be weakened and failure to successfully hire or retain key employees and executives could adversely impact us.

We may elect not to purchase insurance for certain business risks and expenses and, for the insurance coverage we have in place, such coverage may not address all of our potential exposures or, in the case of substantial losses, may be inadequate.

We may elect not to purchase insurance for certain business risks and expenses, such as claimed intellectual property infringement, where we believe we can adequately address the anticipated exposure or where insurance coverage is either not available at all or not available on a cost-effective basis. In addition, product liability and product recall insurance coverage is expensive and may not be available on acceptable terms, in sufficient amounts, or at all. We may be named as a defendant in product liability or other lawsuits asserting potentially large claims if an accident occurs at a location where our products, solutions or services have been or are being used. For those policies that we do have, insurance coverage may be inadequate in the case of substantial losses, or our insurers may refuse to cover us on specific claims. Losses not covered by insurance could be substantial and unpredictable and could adversely impact our financial condition and results of operations. If we are unable to maintain our portfolio of insurance coverage, whether at an acceptable cost or at all, or if there is an increase in the frequency or damage amounts claimed against us, our business, results of operations and financial condition may be negatively impacted.

 

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Any failure by us to identify, manage, integrate and complete acquisitions, divestitures and other significant transactions successfully could harm our financial results, business and prospects.

As part of our business strategy, we have in the past and may, from time to time, in the future acquire businesses or interests in businesses, including non-controlling interests, or form joint ventures or create strategic alliances. Whether we realize the anticipated benefits from such activities depends, in part, upon the successful integration between the businesses involved, the performance and development of the underlying products, capabilities or technologies, our correct assessment of assumed liabilities and the management of the operations. Accordingly, our financial results could be adversely affected by unanticipated performance and liability issues, our failure to achieve synergies and other benefits we expected to obtain, transaction-related charges, amortization related to intangibles, and charges for impairment of long-term assets. These transactions may not be successful.

Our results of operations may be adversely affected if we fail to realize the full value of our goodwill and intangible assets.

As of September 30, 2019, we had total goodwill and net intangible assets of $1,457.6 million which constituted approximately 31.6 percent of our total assets. We assess our net intangible assets and goodwill for impairment annually, and we conduct an interim evaluation whenever events or changes in circumstances, such as operating losses or a significant decline in earnings associated with the acquired business or asset, indicate that these assets may be impaired. For example, as a result of our annual impairment test, goodwill impairment charges of $57 million and $154 million were recorded in 2016 and 2015, respectively, relating to declines in the estimated fair value of the EMEA segment. In view of the sale price of Vertiv in connection with the Separation, and the lower than forecasted operating results in the EMEA segment, Vertiv reviewed this segment for potential impairment and recorded a $57 million non-cash goodwill impairment charge as of September 30, 2016. Additionally, the EMEA segment was unable to meet its operating objectives due to the continued weak economy in Western Europe since an acquisition in 2010. The weak economic recovery combined with intense competitive and market pressures negatively affected profitability in the EMEA segment in 2015 and as such we recorded an impairment of $154 million. Our ability to realize the value of goodwill and net intangible assets will depend on the future cash flows of the businesses to which the goodwill relates. If we are not able to realize the value of the goodwill and net intangible assets, this could adversely affect our results of operations and financial condition, and also result in an impairment of those assets.

The global scope of our operations could impair our ability to react quickly to changing business and market conditions and enforce compliance with company-wide standards and procedures.

As of September 30, 2019, we employed over 19,700 people globally and had manufacturing facilities in the Americas, Asia Pacific and EMEA. We generate substantial revenue outside of the United States and expect that foreign revenue will continue to represent a significant portion of our total revenues. In order to manage our day-to-day operations, we must overcome cultural and language barriers and assimilate different business practices. In addition, we are required to create compensation programs, employment policies and other administrative programs that comply with the laws of multiple countries. We also must communicate and monitor company-wide standards and directives across our global network. Our failure to successfully manage our geographically diverse operations could impair our ability to react quickly to changing business and market conditions and to enforce compliance with company-wide standards and procedures.

Our sales and operations in emerging markets exposes us to economic and political risks.

We generate a significant portion of our revenue from sales in emerging markets. Serving a global customer base requires that we place more materials, production and service assets in emerging markets to capitalize on market opportunities and maintain our cost position. Newer geographic markets may be relatively less profitable due to our investments associated with entering such markets and local pricing pressures, and we may have

 

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difficulty establishing and maintaining the operating infrastructure necessary to support the high growth rates associated with some of those markets. Operations in emerging markets can also present risks that are not encountered in countries with well-established economic and political systems, including:

 

   

changes or ongoing instability in a country’s or region’s economic or political conditions, including inflation, recession, interest rate fluctuations and actual or anticipated military or political conflicts, which could make it difficult for us to anticipate future business conditions, cause delays in the placement of orders, complicate our dealings with governments regarding permits and other regulatory matters and make our customers less willing to make cross-border investments;

 

   

unpredictable or more frequent foreign currency exchange rate fluctuations;

 

   

inadequate infrastructure, including lack of adequate power and water supplies, transportation, raw materials and parts;

 

   

foreign state takeovers of our facilities, trade protectionism, state-initiated industry consolidation or other similar government actions or control;

 

   

changes in and compliance with international, national or local regulatory and legal environments, including laws and policies affecting trade, economic sanctions, foreign investment, labor relations, foreign anti-bribery and anti-corruption;

 

   

the difficulty of enforcing agreements and collecting receivables through certain foreign legal systems;

 

   

longer collection cycles and financial instability among customers;

 

   

trade regulations, boycotts and embargoes, including policies adopted by countries that may favor domestic companies and technologies over foreign competitors, which could impair our ability to obtain materials necessary to fulfill contracts, pursue business or establish operations in such countries;

 

   

difficulty of obtaining adequate financing and/or insurance coverage;

 

   

fluctuations in freight costs, limitations on shipping and receiving capacity, and other disruptions in the transportation and shipping infrastructure;

 

   

political or social instability that may hinder our ability to send personnel abroad or cause us to move our operations to facilities in countries with higher costs and less efficiencies;

 

   

difficulties associated with repatriating earnings generated or held abroad in a tax-efficient manner, changes in tax laws, or tax inefficiencies; and

 

   

exposure to wage, price and capital controls, local labor conditions and regulations, including local labor disruptions and rising labor costs which we may be unable to recover in our pricing to customers.

Consequently, our exposure to the conditions in or affecting emerging markets may have an adverse effect on our business, results of operations and financial condition.

We are exposed to fluctuations in foreign currency exchange rates, and our hedging activities may not protect us against the consequences of such fluctuations on our earnings and cash flows.

As a result of our global operations, our business, results of operations and financial condition may be adversely affected by fluctuations in currency exchange rates, most notably the strengthening of the U.S. dollar against the primary foreign currencies, which could adversely impact our revenue growth in future periods. For example, if the U.S. dollar strengthens against other currencies such as the euro, our revenues reported in U.S. dollars would decline. In addition, for U.S. dollar-denominated sales, an increase in the value of the U.S. dollar would increase the real cost to customers of our products in markets outside the United States, which could result in price concessions in certain markets, impact our competitive position or have an adverse effect on demand for our products and consequently on our business, results of operations and financial condition.

 

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Legal compliance issues, particularly those related to our imports/exports and foreign operations, could adversely impact our business.

We are subject to various anti-corruption laws, including the U.S. Foreign Corrupt Practices Act, as amended, that prohibit payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business. We operate in several less-developed countries and regions that are generally recognized as having a greater risk of potentially corrupt business environments. Our legal compliance and ethics programs, including a code of business conduct, policies on anti-bribery, export controls, environmental and other legal compliance, and periodic training to relevant associates on these matters, are designed to reduce the likelihood of a legal compliance violation. Nevertheless, such a violation could still occur, disrupting our business through fines, penalties, diversion of internal resources, negative publicity and possibly severe criminal or civil sanctions.

We are also subject to applicable import laws, export controls and economic sanctions laws and regulations. Changes in import and export control or trade sanctions laws may restrict our business practices, including cessation of business activities in sanctioned countries or with sanctioned entities, and may result in claims for breach of existing contracts and modifications to existing compliance programs and training schedules. Violations of the applicable export or import control, or economic sanctions laws and regulations, such as an export to an embargoed country, or to a denied party, or the export of a product without the appropriate governmental license, may result in penalties, including fines, debarments from export privileges, and loss of authorizations needed to conduct aspects of our international business, and may harm our ability to enter into contracts with our customers who have contracts with the U.S. government. A violation of the laws and regulations enumerated above could have an adverse effect on our business, results of operations and financial condition.

We are subject to risks related to legal claims and proceedings filed by or against us, and adverse outcomes in these matters may materially harm our business.

We are subject to various claims, disputes, investigations, demands, arbitration, litigation, or other legal proceedings. Legal claims and proceedings may relate to labor and employment, commercial arrangements, intellectual property, environmental, health and safety, property damage, theft, personal injury and various other matters. Legal matters are inherently uncertain and we cannot predict the duration, scope, outcome or consequences. In addition, legal matters are expensive and time-consuming to defend, settle, and/or resolve, and may require us to implement certain remedial measures that could prove costly or disruptive to our business and operations. The unfavorable resolution of one or more of these matters could have an adverse effect on our business, results of operations and financial condition.

Our financial performance may suffer if we cannot continue to develop, commercialize or enforce the intellectual property rights on which our businesses depend, some of which are not patented or patentable, or if we are unable to gain and maintain access to relevant intellectual property rights of third parties through license and other agreements.

Our business relies on a substantial portfolio of intellectual property rights, including trademarks, trade secrets, patents, copyrights and other such rights globally. Intellectual property laws and the protection and enforcement of our intellectual property vary by jurisdiction and we may be unable to protect or enforce our proprietary rights adequately in all cases or such protection and enforcement may be unpredictable and costly, which could adversely impact our growth opportunities, financial performance and competitive position. In addition, our intellectual property rights could be challenged, invalidated, infringed or circumvented, or insufficient to take advantage of current market trends or to provide competitive advantage. For our patent filings, because of the existence of a large number of patents in our fields, the secrecy of some pending patent applications, and the rapid rate of issuance of new patents within our applicable fields, it is not economically practical or even possible to determine conclusively in advance whether a product or any of its components infringes the patent rights of others.

 

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We also rely on maintenance of proprietary information (such as trade secrets, know-how and other confidential information) to protect certain intellectual property. Trade secrets and/or confidential know-how can be difficult to maintain as confidential and we may not obtain confidentiality agreements in all circumstances, or individuals may unintentionally or willfully disclose our confidential information improperly. In addition, confidentiality agreements may not provide an adequate remedy in the event of an unauthorized disclosure of our trade secrets or other confidential information, and the enforceability of such confidentiality agreements may vary from jurisdiction to jurisdiction. Furthermore, laws regarding trade secret rights in certain markets where we operate may afford little or no protection to our trade secrets. Failure to obtain or maintain trade secrets, protection of know-how and other confidential information could adversely impact our business.

In addition, we rely on licensing certain intellectual property rights from third parties. For example, many of our software offerings are developed using software components or other intellectual property licensed from third parties, including proprietary and open source licenses. This practice requires that we monitor and manage our use of third-party and open source software components to comply with the applicable license terms and avoid any inadvertent licensing or public disclosure of our intellectual property pursuant to such license terms, and our ability to comply with such license terms may be affected by factors that we can only partially influence or control. The continuation of good licensing relationships with our third-party licensors is important to our business. It is possible that merger or acquisition activity or the granting of exclusive licenses may result in reduced availability and/or a change to the license terms that were previously in place. If any of our third-party licensors are acquired by our competitors, there is a risk that the applicable licensed intellectual property may no longer be available to us or available only on less favorable terms. Loss of our license rights and an inability to replace such software with other third-party intellectual property on commercially reasonable terms, or at all, could adversely impact our business, results of operations and financial condition.

Third-party claims of intellectual property infringement, including patent infringement, are commonplace and successful third-party claims may limit or disrupt our ability to sell our offerings.

Third parties may claim that we, or customers using our products, are infringing their intellectual property rights. For example, patent assertion entities, or non-practicing entities, may purchase intellectual property assets for the purpose of asserting infringement claims and attempting to extract settlements from us. Regardless of the merit of these claims, they can be time-consuming, costly to defend, and may require that we develop or substitute non-infringing technologies, redesign affected products, divert management’s attention and resources away from our business, require us to enter into settlement or license agreements that may not be available on commercially reasonable terms, pay significant damage awards, including treble damages if we were found to be willfully infringing, or temporarily or permanently cease engaging in certain activities or offering certain products or services in some or all jurisdictions, and any of the foregoing could adversely impact our business.

Furthermore, because of the potential for unpredictable significant damage awards or injunctive relief, even arguably unmeritorious claims may be settled for significant amounts of money. In addition, in circumstances in which we are the beneficiary of an indemnification agreement for such infringement claims, the indemnifying party may be unable or unwilling to uphold its indemnification obligations to us. Our customer contracts and certain of our intellectual property license agreements often include obligations to indemnify our customers and licensees against certain claims of intellectual property infringement, and these obligations may be uncapped. If claims of intellectual property infringement are brought against such customers or licensees in respect of the intellectual property rights, products or services that we provide to them, we may be required to defend such customers or licensees and/or pay a portion of, or all, the costs these parties may incur related to such litigation or claims. In addition, our exposure to risks associated with the use of intellectual property may be increased as a result of acquisitions, as we have a lower level of visibility into the development process with respect to such acquired technology or the care taken to safeguard against infringement or similar risks with respect thereto.

 

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We are subject to environmental, health and safety matters, laws and regulations, including regulations related to the composition and takeback of our products and related to our ownership, lease or operation of the facilities in which we operate, and, as a result, may face significant costs or liabilities associated with environmental, health and safety matters.

We are subject to a broad range of foreign and domestic environmental, health and safety laws, regulations and requirements, including those relating to the discharge of regulated materials into the environment, the generation and handling of hazardous substances and wastes, human health and safety, and the content, composition and takeback of our products. For example, the European Union (EU) Restriction on the Use of Certain Hazardous Substances in Electrical and Electronic Equipment Directive and similar laws and regulations of China and other jurisdictions limit the content of certain hazardous materials such as lead, mercury, and cadmium in the manufacture of electrical equipment, including our products. Additionally, the EU, China and other jurisdictions have adopted or proposed versions of the Waste Electrical and Electronic Equipment Directive, which requires producers of electrical and electronic equipment to assume responsibility for collecting, treating, recycling and disposing of products when they have reached the end of their useful life, as well as Registration, Evaluation, Authorization and Restriction of Chemical Substances regulations, which regulate the handling and use of certain chemical substances that may be used in our products.

If we fail to comply with applicable environmental, health and safety laws and regulations, we may face administrative, civil or criminal fines or penalties, the suspension or revocation of necessary permits and requirements to install additional pollution controls. Furthermore, current and future environmental, health and safety laws, regulations and permit requirements could require us to make changes to our operations or incur significant costs relating to compliance. For example, as climate change issues become more prevalent, foreign, federal, state and local governments and our customers have been responding to these issues. The increased focus on environmental sustainability may result in new regulations and customer requirements, or changes in current regulations and customer requirements, which could materially adversely impact our business, results of operations and financial condition. In addition, we handle hazardous materials in the ordinary course of operations and there may be spills or releases of hazardous materials into the environment. We have significant manufacturing facilities in North and South America, in Asia-Pacific and in EMEA. At sites which we own, lease or operate, or have previously owned, leased or operated, or where we have disposed or arranged for the disposal of hazardous materials, we are currently liable for contamination, and could in the future be liable for additional contamination. We have been, and may in the future, be required to participate in the remediation or investigation of, or otherwise bear liability for, such contamination and be subject to claims from third parties whose property damage, natural resources damage or personal injury is caused by such contamination.

Our business and operations may be adversely affected by the recent coronavirus outbreak or other similar outbreaks.

We derive a significant portion of our revenue from China. We have manufacturing facilities in China, and several of our customers, subcontractors and suppliers also are located in China. As a result of the coronavirus or other similar outbreaks or adverse public health developments, particularly in Asia, our operations, and those of our subcontractors, customers and suppliers, may experience delays or disruptions, such as difficulty obtaining components and temporary suspension of operations. In addition, our financial condition and results of operations could be adversely affected to the extent that coronavirus or any other epidemic or outbreak harms the Chinese economy in general. Furthermore, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect our operating results. Any of the foregoing could materially and adversely affect our business, financial condition and results of operations.

 

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We have a limited history of operating as an independent company, and our historical financial results and unaudited pro forma financial information included elsewhere in this prospectus is not necessarily representative of what our actual financial position or results of operations would have been as an independent company and may not be a reliable indicator of our future results as a public company.

Our historical consolidated and unaudited consolidated financial information included in this prospectus is not necessarily indicative of our future results of operations, financial condition or cash flows, nor does it reflect what our results of operations, financial condition or cash flows would have been as an independent company during the periods presented. Following the Business Combination, our financial condition and future results of operations could be materially different from amounts reflected in our historical financial statements included elsewhere in this prospectus, so it may be difficult for investors to compare our future results as a public company to historical results or to evaluate our relative performance or trends in our business.

In particular, our historical consolidated financial information included in this prospectus is not necessarily indicative of our future results of operations, financial condition or cash flows primarily because of the following factors:

 

   

Prior to the Separation in the fiscal fourth quarter of 2016, our business was operated by Emerson as part of its broader corporate organization, rather than as an independent company. During such time, Emerson or one of its affiliates provided support for various corporate functions for us, such as information technology, shared services, medical insurance, procurement, logistics, marketing, human resources, legal, finance and internal audit.

 

   

Our historical consolidated financial results reflect the direct, indirect and allocated costs for such services historically provided by Emerson prior to the Separation, and these costs may significantly differ from the comparable expenses we would have incurred as an independent company;

 

   

Prior to the Separation, our working capital requirements and capital expenditures historically were satisfied as part of Emerson’s corporate-wide cash management and centralized funding programs, and our cost of debt and other capital may significantly differ from that which is reflected in our historical combined financial statements for the periods prior to the Separation;

 

   

The historical combined financial information for the periods prior to the Separation may not fully reflect the costs associated with the Separation, including the costs related to being an independent company;

 

   

Our historical combined financial information for the periods prior to the Separation does not reflect our obligations under the various transitional and other agreements that we entered into with Emerson in connection with the Separation; and these historical combined financial results reflect the direct, indirect and allocated costs for such services historically provided by Emerson, and these costs may significantly differ from the comparable expenses we would have incurred as an independent company; and

 

   

Our business was integrated with that of Emerson and, prior to the Separation, we benefitted from Emerson’s size and scale in costs, employees and vendor and customer relationships. Thus, costs we will incur as an independent company may significantly exceed comparable costs we would have incurred as part of Emerson and some of our customer relationships may be weakened or lost.

Similarly, the unaudited pro forma financial information in this prospectus is presented for illustrative purposes only and has been prepared based on a number of assumptions including, but not limited to, GSAH being treated as the “acquired” company for financial reporting purposes in the Business Combination and the total debt obligations and the cash and cash equivalents of Vertiv on an assumed date for the Business Combination closing. Accordingly, such pro forma financial information may not be indicative of our future operating or financial performance and our actual financial condition and results of operations may vary materially from the pro forma results of operations and balance sheet contained elsewhere in this prospectus,

 

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including as a result of such assumptions having changed, including as a result of the proposed refinancing transactions. See “Selected Unaudited Pro Forma Condensed Combined Financial Information” and “Prospectus Summary—Recent Developments.

Please refer to “Selected Consolidated Historical Financial Information of Vertiv Holdings,” “Vertiv Holding’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical consolidated and combined financial statements and the notes to those statements included elsewhere in this prospectus.

We have recorded net losses in the past and may experience net losses in the future.

For the nine months ended September 30, 2019 and 2018 (Successor), the years ended December 31, 2018 and 2017 (Successor), the one month ended December 31, 2016 (Successor) and the years ended September 30, 2015 and 2014 (Predecessor), we recorded consolidated and combined net losses of $106.9 million, $274.3 million, $314.0 million, $369.6 million, $171.2 million, $61.8 million and $235.6 million, respectively. Our future results of operations are uncertain and we may continue to record net losses in future periods.

Our substantial level of indebtedness could adversely affect our financial condition and prevent us from making payments on the Existing Notes, the Senior Secured Credit Facilities and our other debt obligations (if any).

We and our subsidiaries have a substantial amount of debt, including existing outstanding indebtedness under the Existing Notes and the Senior Secured Credit Facilities. At September 30, 2019, and on a pro forma basis after giving effect to the consummation of the Business Combination, we and our subsidiaries would have had approximately $2,060.1 million, including $874.2 million of senior secured debt outstanding. In addition we would have had $251.3 million of undrawn commitments (which undrawn commitments are available subject to customary borrowing base conditions) under the Asset-Based Revolving Credit Facility, which, if drawn, would be secured. We also are exploring various refinancing options to optimize our capital structure and on January 31, 2020 commenced various refinancing transactions. For more information on the effect of our debt, see “Prospectus Summary—Recent Developments” and “Unaudited Pro Forma Condensed Combined Financial Information.

Our substantial level of indebtedness could have important consequences, including making it more difficult for us to satisfy our obligations; increasing our vulnerability to adverse economic and industry conditions; limiting our ability to obtain additional financing for future working capital, capital expenditures, raw materials, strategic acquisitions and other general corporate requirements; exposing us to interest rate fluctuations because the interest on the debt under the Term Loan Facility and the Asset-Based Revolving Credit Facility is imposed, and debt under any future debt agreements may be imposed, at variable rates; requiring us to dedicate a substantial portion of our cash flow from operations to payments on our debt (including scheduled repayments on the outstanding term loan borrowings under the Term Loan Facility or any future debt agreements with similar requirements), thereby reducing the availability of our cash flow for operations and other purposes; making it more difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness; limiting our ability to refinance indebtedness or increase the associated costs; requiring us to sell assets to reduce debt or influence our decision about whether to do so; limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate or prevent us from carrying out capital spending that is necessary or important to our growth strategy and efforts to improve operating margins of our business; and placing us at a competitive disadvantage compared to any competitors that have less debt or comparable debt at more favorable interest rates and that, as a result, may be better positioned to withstand economic downturns.

 

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We are subject to fluctuations in interest rates and we do not presently have any existing interest rate swap agreements.

Borrowings under the Term Loan Facility and the Asset-Based Revolving Credit Facility are subject to variable rates of interest and expose us to interest rate risk. At present, we do not have any existing interest rate swap agreements, which involve the exchange of floating for fixed rate interest payments to reduce interest rate volatility. However, we may decide to enter into such swaps in the future. If we do, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness and any swaps we enter into may not fully mitigate our interest rate risk, may prove disadvantageous or may create additional risks.

Despite substantial levels of indebtedness, we and our subsidiaries have the ability to incur more indebtedness. Incurring additional debt could further intensify the risks described above.

We may be able to incur additional debt in the future and the terms of the indentures governing the Existing Notes, and the credit agreements governing the Term Loan Facility and the Asset-Based Revolving Credit Facility will not fully prohibit us and our subsidiaries, as applicable, from doing so. We have the ability to draw upon our $400.0 million Asset-Based Revolving Credit Facility (subject to customary borrowing base limitations) and the ability to increase the aggregate availability thereunder by up to $150.0 million (subject to receipt of commitments). We also have the ability to draw upon the uncommitted accordion provided under the Term Loan Facility, which, as of the date of closing of the Term Loan Facility, permitted incremental term loans thereunder of up to $325.0 million, plus the sum of all voluntary prepayments of the Term Loan Facility and certain permitted indebtedness that is secured on a pari passu basis with the Term Loan Facility, in each case, to the extent not financed with the incurrence of additional long-term indebtedness, plus an unlimited amount so long as the “consolidated first lien net leverage ratio” (as defined in the Term Loan Facility) of Vertiv Group and its restricted subsidiaries, determined on a pro forma basis, would not exceed 3.05:1.00. We have incurred $325.0 million in initial aggregate principal amount of incremental term loans since the closing of the Term Loan Facility. The amount of the Term Loan Facility and the Asset-Based Revolving Credit Facility may be increased if we meet certain conditions. If new debt is added to our current debt levels, the related risks that we now face could intensify and we may not be able to meet all our respective debt obligations. In addition, the Term Loan Facility, the Asset-Based Revolving Credit Facility and the indentures governing the Existing Notes do not prevent us from incurring obligations that do not constitute indebtedness under those agreements.

Restrictive covenants in the indentures governing the Existing Notes and the credit agreements governing the Term Loan Facility and the Asset-Based Revolving Credit Facility, and any future debt agreements, could restrict our operating flexibility.

The indentures governing the Existing Notes and the credit agreements governing the Term Loan Facility and the Asset-Based Revolving Credit Facility contain covenants that limit our and our restricted subsidiaries’ ability to take certain actions. These restrictions may limit our ability to operate our businesses, prohibit or limit our ability to enhance our operations or take advantage of potential business opportunities as they arise.

The indentures governing the Existing Notes contain restrictive covenants that, among other things, limit certain of our subsidiaries’ ability to incur additional indebtedness or issue preferred stock; pay dividends, redeem stock or make other distributions; make other restricted payments or investments; create liens on assets; create restrictions on payment of dividends or other amounts by us to our restricted subsidiaries; transfer or sell assets; engage in mergers or consolidations; engage in certain transactions with affiliates; and, in the case of the 2024 Senior Notes only, designate subsidiaries as unrestricted subsidiaries.

The credit agreements governing the Term Loan Facility and the Asset-Based Revolving Credit Facility restrict (subject to customary exceptions), among other things, certain of our subsidiaries’ ability to incur additional indebtedness; pay dividends or other payments on capital stock; guarantee other obligations; grant liens on assets; make loans, acquisitions or other investments; dispose of assets; make optional payments of, or

 

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otherwise modify, certain debt instruments; engage in transactions with affiliates; amend organizational documents; engage in mergers or consolidations; enter into arrangements that restrict certain of our subsidiaries’ ability to pay dividends; change the nature of the business conducted by Vertiv Group and its subsidiaries; and designate our subsidiaries as unrestricted subsidiaries.

In addition, under the Asset-Based Revolving Credit Facility, if availability goes below a certain threshold, Vertiv Group and its restricted subsidiaries are required to comply with a minimum “consolidated fixed charge coverage ratio” (as defined in the Asset-Based Revolving Credit Facility).

Any future debt agreements also could have terms similar to those set forth above or other restrictive terms. See “Prospectus Summary—Recent Developments.

Our ability to comply with the covenants and restrictions contained in the indentures governing the Existing Notes and the credit agreements governing the Term Loan Facility and the Asset-Based Revolving Credit Facility, and any future debt agreements, is not fully within our control and breaches of such covenants or restrictions could trigger adverse consequences.

Our ability to comply with the covenants and restrictions contained in the indentures governing the Existing Notes and the credit agreements governing the Term Loan Facility and the Asset-Based Revolving Credit Facility, and any future debt agreements, may be affected by economic conditions and by financial, market and competitive factors, many of which are beyond our control. Our ability to comply with these covenants in future periods will also depend substantially on the pricing and sales volume of our products, our success at implementing cost reduction initiatives and our ability to successfully implement our overall business strategy. The breach of any of these covenants or restrictions could result in a default under the indentures governing the Existing Notes and the credit agreements governing the Term Loan Facility and/or the Asset-Based Revolving Credit Facility, or any future debt, that would permit the holders or applicable lenders to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest and any applicable redemption premium. In that case, the applicable borrowers may be unable to borrow under the Term Loan Facility and the Asset-Based Revolving Credit Facility, or any future debt, may not be able to repay the amounts due under the Term Loan Facility and the Asset-Based Revolving Credit Facility, or any future debt, and may not be able make cash available to us, by dividend, debt repayment or otherwise, to enable us to make payments on the Existing Notes, or any future debt. In addition, the lenders under the Term Loan Facility and the Asset-Based Revolving Credit Facility, or any future debt, could proceed against the collateral securing that indebtedness. This could have serious consequences to our financial position, results of operations and/or cash flows and could cause us to become bankrupt or insolvent.

Our business plan is dependent on access to funding through the capital markets.

Our ability to invest in our businesses, make strategic acquisitions and refinance maturing debt obligations requires access to the capital markets and sufficient bank credit lines to support short-term borrowings. Volatility in the capital markets may increase costs associated with issuing commercial paper or other debt instruments, or affect our ability to access those markets. Any decline in the ratings of our corporate credit or any indications from the rating agencies that their ratings on our corporate credit are under surveillance or review with possible negative implications could adversely impact our ability to access capital. If we are unable to continue to access the capital markets, our ability to effectively execute our business plan could be adversely affected, which could have a material adverse effect on our business and financial results. Additionally, if our customers, suppliers or financial institutions are unable to access the capital markets to meet their commitments to us, our business could be adversely impacted.

 

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Risks Related to the Ownership of our Securities

The Vertiv Stockholder has significant influence over us.

As of February 7, 2020, the Vertiv Stockholder beneficially owned approximately 36.01% of our outstanding Class A common stock. As long as the Vertiv Stockholder owns or controls a significant percentage of our outstanding voting power, it will have the ability to significantly influence all corporate actions requiring stockholder approval, including the election and removal of directors and the size of our Board, any amendment to our Organizational Documents, or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets. The Vertiv Stockholder’s influence over our management could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which could cause the market price of our Class A common stock to decline or prevent stockholders from realizing a premium over the market price for our Class A common stock. Because our Certificate of Incorporation opts out of Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”) regulating certain business combinations with interested stockholders, the Vertiv Stockholder may transfer shares to a third party by transferring their common stock without the approval of our Board or other stockholders, which may limit the price that investors are willing to pay in the future for shares of our common stock. Pursuant to the Stockholders Agreement entered into by and among the Company, the Sponsor and the Vertiv Stockholder, the Vertiv Stockholder will initially have the right to nominate up to four directors (at least two of whom will be independent) to our Board. The Vertiv Stockholder’s right to nominate directors to our Board is subject to its ownership percentage of the total outstanding shares of Class A common stock. If the Vertiv Stockholder holds: (1) 30% or greater of the outstanding Class A common stock, it will have the right to nominate four directors (at least two of whom will be independent); (2) less than 30% but greater than or equal to 20% of the outstanding Class A common stock, it will have the right to nominate three directors (at least one of whom will be independent); (3) less than 20% but greater than or equal to 10% of the outstanding Class A common stock, it will have the right to nominate two directors (none of whom will be required to be independent); (4) less than 10% but greater than or equal to 5% of the outstanding Class A common stock, it will have the right to nominate one director (none of whom will be required to be independent); and (5) less than 5% of the outstanding Class A common stock, it will not have the right to nominate any directors.

The Vertiv Stockholder’s interests may not align with our interests as a company or the interests of our other stockholders. Accordingly, the Vertiv Stockholder could cause us to enter into transactions or agreements of which you would not approve or make decisions with which you would disagree. Further, the Vertiv Stockholder is in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. The Vertiv Stockholder may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. In recognition that principals, members, directors, managers, partners, stockholders, officers, employees and other representatives of the Vertiv Stockholder and its affiliates and investment funds may serve as our directors or officers, our Certificate of Incorporation provides, among other things, that none of the Vertiv Stockholder or any principal, member, director, manager, partner, stockholder, officer, employee or other representative of the Vertiv Stockholder has any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business that we do. In the event that any of these persons or entities acquires knowledge of a potential transaction or matter which may be a corporate opportunity for itself and us, we will not have any expectancy in such corporate opportunity, and these persons and entities will not have any duty to communicate or offer such corporate opportunity to us and may pursue or acquire such corporate opportunity for themselves or direct such opportunity to another person. These potential conflicts of interest could have a material adverse effect on our business, financial condition and results of operations if, among other things, attractive corporate opportunities are allocated by the Vertiv Stockholder to itself or its other affiliates.

We are required to pay the Vertiv Stockholder for a significant portion of the tax benefits relating to pre-Business Combination tax assets and attributes, regardless of whether any tax savings are realized.

At the closing of the Business Combination, we entered into the Tax Receivable Agreement, which generally provides for the payment by us to the Vertiv Stockholder of 65% of the cash tax savings in U.S.

 

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federal, state, local and certain foreign taxes, that we actually realize (or are deemed to realize) in periods after the closing of the Business Combination as a result of (i) increases in the tax basis of certain intangible assets of Vertiv resulting from certain pre-Business Combination acquisitions, (ii) certain U.S. federal income tax credits for increasing research activities (so-calledR&D credits”) and (iii) tax deductions in respect of certain Business Combination expenses. We expect to retain the benefit of the remaining 35% of these cash tax savings. The payments described in (i) and (ii) above will generally be deferred until the close of our third taxable year following the closing of the Business Combination and will be payable over the following nine taxable years. The payments described in (iii) above will generally be deferred until the close of our fourth taxable year following the closing of the Business Combination and will be payable ratably over the following three taxable years regardless of whether we actually realize such tax benefits in such years.

Under certain circumstances (including a material breach of our obligations, certain actions or transactions constituting a change of control, a divestiture of certain assets, upon the end of the term of the Tax Receivable Agreement or after three years, at our option), payments under the Tax Receivable Agreement will be accelerated and become immediately due. In such case, the payments due upon acceleration would be based on the present value of our anticipated future tax savings using certain valuation assumptions, including that we and our subsidiaries will generate sufficient taxable income to fully utilize the applicable tax assets and attributes covered under the Tax Receivable Agreement (or, in the case of a divestiture of certain assets, the applicable tax attributes relating to such assets). Consequently, it is possible in these circumstances that the actual cash tax savings realized by us may be significantly less than the corresponding Tax Receivable Agreement payments we are required to make at the time of acceleration. Furthermore, the acceleration of our obligations under the Tax Receivable Agreement could have a substantial negative impact on our liquidity. Additionally, the obligation to make payments under the Tax Receivable Agreement, including the acceleration of our obligation to make payments in the event of a change of control, could make us a less attractive target for a future acquisition.

While the timing of any payments under the Tax Receivable Agreement will vary depending upon the amount and timing of our taxable income, we expect that the payments that we will be required to make under the Tax Receivable Agreement could be substantial. Payments under the Tax Receivable Agreement will be based on the tax reporting positions that we determine, and such tax reporting positions are subject to challenge by taxing authorities. Payments made under the Tax Receivable Agreement will not be returned upon a successful challenge by a taxing authority to our reporting positions, although such excess payments made to the Vertiv Stockholder may be netted against payments otherwise to be made to the Vertiv Stockholder after our determination of such excess. Any payments made by us under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to us.

For more information about the Tax Receivable Agreement, please see the section entitled “Business Combination—Related Agreement—Tax Receivable Agreement.”

Resales of our securities may cause the market price of our securities to drop significantly, even if our business is doing well

Subject to certain exceptions: the Vertiv Stockholder is contractually restricted from selling or transferring its Stock Consideration Shares until August 5, 2020 and the Initial Stockholders are contractually restricted from selling or transferring their founder shares, private placement warrants and Class A common stock underlying the private placement warrants until the end of the applicable Sponsor Lock-up Period. However, following the expiration of such lockups, neither the Vertiv Stockholder nor the Initial Stockholders will be restricted from selling their securities, other than by applicable securities laws. Additionally, the other PIPE Investors are not restricted from selling any of their securities, other than by applicable securities laws.

We also intend to register all shares of Class A common stock that we may issue under the Incentive Plan. Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates.

 

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The Vertiv Stockholder, the Initial Stockholders and the PIPE Investors, collectively own approximately 79% of our outstanding Class A common stock (including the shares of Class A common stock included in the units). Additionally, 33,533,303 shares of our Class A common stock will be issuable upon the exercise of our warrants (including the warrants included in the units). All of the founder shares, private placement warrants, PIPE Shares, Stock Consideration Shares, and the Other Registrable Securities held by the RRA Parties have been registered for resale under the Securities Act on the registration statement of which this prospectus is a part. As restrictions on resale end, the warrants become exercisable and registration statements are available for use, the sale or possibility of sale of shares by the Vertiv Stockholder, the Initial Stockholders and the PIPE Investors could have the effect of increasing the volatility in our share price or the market price of our securities could decline if the holders of currently restricted shares sell them or are perceived by the market as intending to sell them.

The trading price of our Class A common stock, warrants and units may be volatile.

The trading price of our Class A common stock, warrants and units may highly volatile and subject to wide fluctuations due to a number of factors such as the following, some of which will be beyond our control. Some of the factors that could negatively affect the market price of our Class A common stock, warrants and units or result in significant fluctuations in price, regardless of our actual operating performance, include:

 

   

actual or anticipated variations in our quarterly operating results;

 

   

results of operations that vary from the expectations of securities analysts and investors;

 

   

changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;

 

   

changes in market valuations of similar companies;

 

   

changes in the markets in which we operate;

 

   

announcements by us, our competitors or our vendors of significant contracts, acquisitions, joint marketing relationships, joint ventures or capital commitments;

 

   

announcements by third parties of significant claims or proceedings against us;

 

   

additions or departures of key personnel;

 

   

actions by stockholders, including the sale by the Vertiv Stockholder and the PIPE Investors of any of their shares of our common stock;

 

   

speculation in the press or investment community;

 

   

general market, economic and political conditions, including an economic slowdown;

 

   

uncertainty regarding economic events, including in Europe in connection with the United Kingdom’s possible departure from the European Union;

 

   

changes in interest rates;

 

   

our operating performance and the performance of other similar companies;

 

   

our ability to accurately project future results and our ability to achieve those and other industry and analyst forecasts; and

 

   

new legislation or other regulatory developments that adversely affect us, our markets or our industry.

Furthermore, in recent years, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in our industry, and often occurs without regard to the operating performance of the affected companies. Therefore, factors that have little or nothing to do with us could cause the price of our Class A common stock, warrants and units to fluctuate, and these fluctuations or any fluctuations related to our company could cause the market price of our Class A common stock, warrants and units to decline materially.

 

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In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of our management team from our business regardless of the outcome of such litigation.

Compliance obligations under the Sarbanes-Oxley Act require substantial financial and management resources.

As a privately held company, Vertiv was not subject to Section 404 of the Sarbanes-Oxley Act. The standards required for a public company under Section 404 of the Sarbanes-Oxley Act are significantly more stringent than those required of Vertiv as a privately held company. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that are applicable to us after the Business Combination. If we are not able to implement the requirements of Section 404, including any additional requirements once we are no longer an emerging growth company, in a timely manner or with adequate compliance, we may not be able to assess whether our internal controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our securities. Additionally, once we are no longer an emerging growth company, we will be required to comply with the independent registered public accounting firm attestation requirement on our internal control over financial reporting. We currently anticipate losing our “emerging growth company” status at 2020 year end.

The obligations associated with being a public company involve significant expenses and require significant resources and management attention, which may divert from our business operations.

As a public company, we are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act. The Exchange Act requires the filing of annual, quarterly and current reports with respect to a public company’s business and financial condition. The Sarbanes-Oxley Act requires, among other things, that a public company establish and maintain effective internal control over financial reporting. As a result, we will incur significant legal, accounting and other expenses that Vertiv did not previously incur. Vertiv’s entire management team and many of its other employees will need to devote substantial time to compliance, and may not effectively or efficiently manage our transition into a public company.

These rules and regulations will result in us incurring substantial legal and financial compliance costs and will make some activities more time-consuming and costly. For example, these rules and regulations will likely make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be difficult for us to attract and retain qualified people to serve on our Board, board committees or as executive officers.

We are currently an emerging growth company within the meaning of the Securities Act, and to the extent we have taken advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.

We are currently an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities

 

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less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of the IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the prior June 30th; and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. We currently anticipate losing our “emerging growth company” status at 2020 year end.

Warrants will become exercisable for our Class A common stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

Outstanding warrants to purchase an aggregate approximately 33.5 million shares of our Class A common stock will become exercisable in accordance with the terms of the warrant agreement. These warrants will become exercisable on March 8, 2020. The exercise price of these warrants will be $11.50 per share. To the extent such warrants are exercised, additional shares of our Class A common stock will be issued, which will result in dilution to the holders of our Class A common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of our Class A common stock. However, there is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.

The warrants may not be in the money after they become exercisable, they may expire worthless and the terms of the warrants may be amended in a manner that may be adverse to holders of our warrants with the approval by the holders of at least 50% of the then outstanding public warrants. As a result, the exercise price of the warrants could be increased, the warrants could be converted into cash or stock (at a ratio different than initially provided), the exercise period could be shortened and the number of shares of our Class A common stock purchasable upon exercise of a warrant could be decreased, all without a warrant holder’s approval.

The public warrants may never be in the money, and they may expire worthless. Our warrants were issued in registered form under a warrant agreement between Computershare Trust Company, N.A. and Computershare Inc., acting together as warrant agent (together, “Computershare”), and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least

 

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50% of the then outstanding public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 50% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or stock (at a ratio different than initially provided), shorten the exercise period or decrease the number of shares of our Class A common stock purchasable upon exercise of a warrant.

We may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to a warrant holder, thereby making the warrants worthless.

We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we send the notice of redemption to the warrant holders. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force warrant holders to: (1) exercise their warrants and pay the exercise price therefor at a time when it may be disadvantageous to do so (2) sell their warrants at the then-current market price when they might otherwise wish to hold their warrants; or (3) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of the warrants. None of the private placement warrants will be redeemable by us so long as they are held by our Sponsor or its permitted transferees.

In addition, we may redeem warrants after they become exercisable for a number of shares of Class A common stock determined based on the redemption date and the fair market value of our Class A common stock. Please see “Description of Securities—Warrants—Public Warrants—Redemption of warrants for shares of Class A common stock.” Any such redemption may have similar consequences to a cash redemption described above. In addition, such redemption may occur at a time when the warrants are “out-of-the-money,” in which case warrant holders would lose any potential embedded value from a subsequent increase in the value of the Class A common stock had the warrants remained outstanding. None of the private placement warrants will be redeemable by us so long as they are held by our Sponsor Members or their permitted transferees.

The NYSE may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

Our Class A common stock, public warrants and units are listed on the NYSE. There is no guarantee that these securities will remain listed on the NYSE. Although we currently meet the minimum initial listing standards set forth in the NYSE listing standards, there can be no assurance that these securities will continue to be listed on the NYSE in the future. In order to continue listing our securities on the NYSE, we must maintain certain financial, distribution and share price levels. In general, we must maintain a minimum number of holders of our securities.

If the NYSE delists any of our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:

 

   

a limited availability of market quotations for our securities;

 

   

reduced liquidity for our securities;

 

   

a determination that our Class A common stock are a “penny stock” which will require brokers trading in our Class A common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

 

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a limited amount of news and analyst coverage; and

 

   

a decreased ability to issue additional securities or obtain additional financing in the future.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our Class A common stock, public warrants and units are listed on the NYSE, our Class A common stock, public warrants and units qualify as covered securities under such statute. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. If we were no longer listed on the NYSE, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities.

The coverage of our business or our securities by securities or industry analysts or the absence thereof could adversely affect our securities and trading volume.

The trading market for our securities will be influenced in part by the research and other reports that industry or securities analysts may publish about us or our business or industry from time to time. We do not control these analysts or the content and opinions included in their reports. As a former blank check company, we may be slow to attract equity research coverage, and the analysts who publish information about our securities will have had relatively little experience with our company, which could affect their ability to accurately forecast our results and make it more likely that we fail to meet their estimates. If no or few analysts commence equity research coverage of us, the trading price and volume of our securities would likely be negatively impacted. If analysts do cover us and one or more of them downgrade our securities, or if they issue other unfavorable commentary about us or our industry or inaccurate research, our stock price would likely decline. Furthermore, if one or more of these analysts cease coverage or fail to regularly publish reports on us, we could lose visibility in the financial markets. Any of the foregoing would likely cause our stock price and trading volume to decline.

Anti-takeover provisions contained in our Organizational Documents, as well as provisions of Delaware law, could impair a takeover attempt.

Our Organizational Documents contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. Certain of these provisions provide:

 

   

no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

 

   

the requirement that directors may only be removed from the Board for cause;

 

   

the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board;

 

   

a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

 

   

a prohibition on stockholders calling a special meeting and the requirement that a meeting of stockholders may only be called by members of our Board or the Chief Executive Officer of the Company, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and

 

   

advance notice procedures that stockholders must comply with in order to nominate candidates to our Board or to propose matters to be acted upon at a meeting of stockholders, which may discourage or

 

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deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company.

Our Certificate of Incorporation includes a forum selection clause, which could discourage claims or limit stockholders’ ability to make a claim against us, our directors, officers, other employees or stockholders.

Our Certificate of Incorporation includes a forum selection clause, which provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery in the State of Delaware shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring: (a) any derivative action or proceeding brought on behalf of the Company; (b) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees of the Company to the Company or our stockholders; (c) any action asserting a claim arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws; or (d) any action asserting a claims governed by the internal affairs doctrine, except for, as to each of (a) through (d) above, any claim (i) as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (ii) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, (iii) for which the Court of Chancery does not have subject matter jurisdiction or (iv) arising under the federal securities laws, including the Securities Act, as to which the Court of Chancery and the federal district court for the District of Delaware shall concurrently be the sole and exclusive forums. This forum selection clause may discourage claims or limit stockholders’ ability to submit claims in a judicial forum that they find favorable and may result in additional costs for a stockholder seeking to bring a claim. While we believe the risk of a court declining to enforce this forum selection clause is low, if a court were to determine the forum selection clause to be inapplicable or unenforceable in an action, we may incur additional costs in conjunction with our efforts to resolve the dispute in an alternative jurisdiction, which could have a negative impact on our results of operations and financial condition. Notwithstanding the foregoing, the forum selection clause will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America shall be the sole and exclusive forum.

We are a holding company and will depend on the ability of our subsidiaries to pay dividends.

We are a holding company without any direct operations and have no significant assets other than our ownership interest in Second Merger Sub. Accordingly, our ability to pay dividends depends upon the financial condition, liquidity and results of operations of, and our receipt of dividends, loans or other funds from, our subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation to make funds available to us. In addition, there are various statutory, regulatory and contractual limitations and business considerations on the extent, if any, to which our subsidiaries may pay dividends, make loans or otherwise provide funds to us. For example, the ability of our subsidiaries to make distributions, loans and other payments to us for the purposes described above and for any other purpose may be limited by the terms of the agreements governing our outstanding indebtedness.

 

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USE OF PROCEEDS

All of the securities offered by the Selling Holders pursuant to this prospectus will be sold by the Selling Holders for their respective accounts. We will not receive any of the proceeds from these sales. We will receive up to an aggregate of approximately $385,632,984 from the exercise of all public warrants and private placement warrants assuming the exercise in full of all such warrants for cash. Unless we inform you otherwise in a prospectus supplement or free writing prospectus, we intend to use the net proceeds from the exercise of such warrants for general corporate purposes which may include acquisitions or other strategic investments or repayment of outstanding indebtedness.

The Selling Holders will pay any underwriting discounts and commissions and expenses incurred by the Selling Holders for brokerage, accounting, tax or legal services or any other expenses incurred by the Selling Holders in disposing of the securities. We will bear the costs, fees and expenses incurred in effecting the registration of the securities covered by this prospectus, including all registration and filing fees, NYSE listing fees and fees and expenses of our counsel and our independent registered public accounting firm.

 

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DIVIDEND POLICY

We expect to initiate an annual dividend of $0.01 per share of our Class A common stock. We are a holding company without any direct operations and have no significant assets other than our ownership interest in Second Merger Sub. Accordingly, our ability to pay dividends depends upon the financial condition, liquidity and results of operations of, and our receipt of dividends, loans or other funds from, our subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation to make funds available to us. In addition, there are various statutory, regulatory and contractual limitations and business considerations on the extent, if any, to which our subsidiaries may pay dividends, make loans or otherwise provide funds to us. For example, the ability of our subsidiaries to make distributions, loans and other payments to us for the purposes described above and for any other purpose may be limited by the terms of the agreements governing our outstanding indebtedness. The declaration and payment of dividends is also at the discretion of our Board of Directors and depends on various factors including our results of operations, financial condition, cash requirements, prospects and other factors deemed relevant by our Board of Directors.

In addition, under Delaware law, our Board of Directors may declare dividends only to the extent of our surplus (which is defined as total assets at fair market value minus total liabilities, minus statutory capital) or, if there is no surplus, out of our net profits for the then-current and/or immediately preceding fiscal year.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined balance sheet as of September 30, 2019 and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2018 and the nine months ended September 30, 2019 present the historical financial statements of Vertiv Holdings, adjusted to reflect the Business Combination. GSAH and Vertiv shall collectively be referred to herein as the “Companies.” The Companies, subsequent to the Business Combination, shall be referred to herein as the “Company.”

The unaudited pro forma condensed consolidated combined balance sheet as of September 30, 2019 assumes that the Business Combination was completed on September 30, 2019. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2018 and for the nine months ended September 30, 2019 give pro forma effect to the Business Combination as if it had occurred on January 1, 2018.

The unaudited pro forma condensed combined balance sheet and statement of operations as of and for the nine months ended September 30, 2019 were derived from Vertiv’s unaudited condensed financial statements as of and for the nine months ended September 30, 2019 and GSAH’s unaudited condensed consolidated financial statements as of and for the nine months ended September 30, 2019. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2018 was derived from Vertiv’s audited consolidated statement of operations for the year ended December 31, 2018 and GSAH’s audited consolidated statement of operations for the year ended December 31, 2018. GSAH’s balances have been classified consistently with Vertiv’s presentation.

On December 10, 2019, GSAH entered into the Merger Agreement with First Merger Sub, Second Merger Sub, Vertiv Holdings and the Vertiv Stockholder, and on February 7, 2020, the Business Combination was consummated. The unaudited pro forma condensed combined financial information does not purport to represent our actual results of operations giving effect to the Business Combination or to project our results of operations that may be achieved after the Business Combination.

After giving effect to the Business Combination, the Company owns, directly or indirectly, all of the assets of Vertiv and its subsidiaries, and the Vertiv Stockholder holds a portion of the Company’s Class A common stock. Vertiv is considered the accounting acquirer, as further discussed below in “—Note 2—Basis of the Pro Forma Presentation.”

 

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GS ACQUISITION HOLDINGS CORP

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

SEPTEMBER 30, 2019

 

(Dollars in millions)    Historical as of
September 30, 2019
                 As of
September 30,
2019
 
   Vertiv
Holdings
LLC
    GS
Acquisition
Holdings
Corp
     Pro Forma
Adjustments
    Note     Pro Forma
Combined
 

ASSETS

           

Current assets:

           

Cash and cash equivalents

   $ 149.3       0.2        1,239.0       (a)       149.5  
          705.0       (a)(b)    
          (1,944.0     (a)    

Accounts receivable, net

     1,208.0       —              1,208.0  

Inventories

     443.2       —              443.2  

Other current assets

     162.8       0.4            163.2  
  

 

 

   

 

 

    

 

 

     

 

 

 

Total current assets

     1,963.3       0.6        —           1,963.9  
  

 

 

   

 

 

    

 

 

     

 

 

 

Property, plant and equipment, net

     415.2              415.2  

Other assets:

           

Cash and cash equivalents held in Trust

     —         703.9        (703.9     (b)       0.0  

Goodwill

     618.0       —              618.0  

Other intangible assets, net

     1,457.6       —              1,457.6  

Deferred income taxes

     4.2       —              4.2  

Other

     152.9       1.1        (1.1     (b)       152.9  
  

 

 

   

 

 

    

 

 

     

 

 

 

Total other assets

     2,232.7       705.0        (705.0       2,232.7  
  

 

 

   

 

 

    

 

 

     

 

 

 

Total assets

   $ 4,611.2       705.6        (705.0       4,611.8  
  

 

 

   

 

 

    

 

 

     

 

 

 

LIABILITIES AND EQUITY

           

Current liabilities:

           

Accounts payable

   $ 613.4       1.2            614.6  

Accrued expenses and other liabilities

     832.4       —              832.4  

Income taxes

     25.5       —              25.5  
  

 

 

   

 

 

    

 

 

     

 

 

 

Total current liabilities

     1,471.3       1.2        —           1,472.5  
  

 

 

   

 

 

    

 

 

     

 

 

 

Long-term debt, net

     3,479.5       —          (1,419.4     (c)       2,060.1  

Deferred income taxes

     138.8       —              138.8  

Other long-term liabilities

     217.8       24.2        (24.2     (d)       330.0  
          112.2       (e)    
  

 

 

   

 

 

    

 

 

     

 

 

 

Total liabilities

     5,307.4       25.4        (1,331.4       4,001.4  
  

 

 

   

 

 

    

 

 

     

 

 

 

Class A Stock subject to redemption

       675.2        (675.2     (f)       —    

Equity

           

Common stock Class A

     —         —          —         (f)       —    

Common stock Class B

     —         —          —         (f)       —    

Additional paid-in capital

     277.7       —          1,239.0       (a)       1,751.1  
          675.2       (f)    
          (415.0     (a)    
          (25.8     (a)    

Accumulated (deficit) earnings

     (966.7     5.0        (59.6     (c)       (1,133.5
          (112.2     (e)    

Accumulated other comprehensive income (loss)

     (7.2     —              (7.2

Total equity

     (696.2     5.0        1,301.6         610.4  
  

 

 

   

 

 

    

 

 

     

 

 

 

Total liabilities and equity

   $ 4,611.2       705.6        (705.0       4,611.8  
  

 

 

   

 

 

    

 

 

     

 

 

 

 

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GS ACQUISITION HOLDINGS CORP

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

 

(Dollars in millions, except shares outstanding and per share
amounts)
   For the
nine months
ended
September 30,
2019
                Nine months
ended
September 30,
2019
 
   Vertiv
Holdings
LLC
    GS
Acquisition
Holdings
Corp
    Pro Forma
Adjustments
    Note     Pro Forma
Combined
 

Net sales:

          

Net sales—products

   $ 2,478.0       —         —           2,478.0  

Net sales—services

     781.7       —         —           781.7  
  

 

 

   

 

 

   

 

 

     

 

 

 

Net sales

     3,259.7       —         —           3,259.7  

Costs and expenses:

          

Cost of sales—products

     1,741.3       —         —           1,741.3  

Cost of sales—services

     452.6       —         —           452.6  
  

 

 

   

 

 

   

 

 

     

 

 

 

Cost of sales

     2,193.9       —         —           2,193.9  

Selling, general and administrative expenses

     809.0       1.7       —           810.7  

Other deductions, net

     98.6       —         —           98.6  

Dividend (income) expense

     —         (11.3     11.3       (g)       —    

Interest expense, net

     234.2       —         (85.2     (h)       149.0  
  

 

 

   

 

 

   

 

 

     

 

 

 

Income (loss) before income taxes

     (76.0     9.6       73.9         7.5  

Income tax (benefit) expense

     30.9       2.0       (2.0     (i)       30.9  
  

 

 

   

 

 

   

 

 

     

 

 

 

Income (loss) from continuing operations

   $ (106.9     7.6       75.9         (23.4
  

 

 

   

 

 

   

 

 

     

 

 

 

Earnings per share

          

Pro Forma weighted average common shares outstanding—basic and diluted

             328,411,955  

Pro Forma net income (loss) per share basis basic and diluted

           (j)     $ (0.07

Historical

          

Weighted average shares outstanding of Class A common stock

       69,000,000        

Basic and diluted net income per share, Class A

     $ 0.09        

Weighted average shares outstanding of Class B common stock

       17,250,000        

Basic and diluted net income per share, Class B

     $ 0.09        

 

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GS ACQUISITION HOLDINGS CORP

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2018

 

(Dollars in millions, except shares outstanding and
per share amounts)
   For the year ended
December 31, 2018
                Year ended
December 31, 2018
 
   Vertiv
Holdings
LLC
    GS
Acquisition
Holdings
Corp
    Pro Forma
Adjustments
    Note     Pro Forma
Combined
 

Net sales:

          

Net sales—products

   $ 3,230.3     $ —         —           3,230.3  

Net sales—services

     1,055.3       —         —           1,055.3  
  

 

 

   

 

 

   

 

 

     

 

 

 

Net sales

     4,285.6       —         —           4,285.6  

Costs and expenses:

          

Cost of sales—products

     2,274.5       —         —           2,274.5  

Cost of sales—services

     590.7       —         —           590.7  
  

 

 

   

 

 

   

 

 

     

 

 

 

Cost of sales

     2,865.2       —         —           2,865.2  

Selling, general and administrative expenses

     1,223.8       1.0       —           1,224.8  

Other deductions (income), net

     178.8       —         —           178.8  

Dividend (income) expense

     —         (7.4     7.4       (g)       —    

Interest expense, net

     288.8       —         (101.8     (h)       187.0  
  

 

 

   

 

 

   

 

 

     

 

 

 

Income (loss) before income taxes

     (271.0     6.4       94.4         (170.2

Income tax (benefit) expense

     49.9       1.4       (1.4     (i)       49.9  
  

 

 

   

 

 

   

 

 

     

 

 

 

Income (loss) from continuing operations

   $ (320.9     5.0       95.8         (220.1
  

 

 

   

 

 

   

 

 

     

 

 

 

Earnings per share

          

Pro Forma weighted average common shares outstanding—basic and diluted

             328,411,955  

Pro Forma net income (loss) per share basis basic and diluted

           (j)     $ (0.67

Historical

          

Weighted average shares outstanding of Class A common stock

       69,000,000        

Basic and diluted net income per share, Class A

   $ 0.06          

Weighted average shares outstanding of Class B common stock

     17,250,000          

Basic and diluted net income per share, Class B

   $ 0.06          

 

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NOTE 1—Description of the Business Combination

On December 10, 2019, GSAH, Vertiv Holdings, the Vertiv Stockholder, First Merger Sub and Second Merger Sub entered into the Merger Agreement, and on February 7, 2020, the Business Combination was consummated. Pursuant to the Business Combination, First Merger Sub merged with and into Vertiv Holdings, with Vertiv Holdings continuing as the surviving entity (the “First Merger”) and (2) immediately following the First Merger and as part of the same overall transaction as the First Merger, Vertiv Holdings merged with and into Second Merger Sub with Second Merger Sub continuing as the surviving entity, in each case, in accordance with the terms and subject to the conditions of the Merger Agreement. Following the closing of the Business Combination, (a) the Company owns all the equity interests of Vertiv Holdings and (b) the Vertiv Stockholder, the sole equity owner of Vertiv Holdings prior to the Business Combination, holds a portion of the Company’s Class A common stock. Vertiv is considered the accounting acquirer, as further discussed below in “Note 2Basis of the Pro Forma Presentation.”

The aggregate consideration for the Business Combination included a combination of cash and stock consideration as follows:

 

Shares transferred at closing

     118,261,955  

Value per share(1)

   $ 10.00  
  

 

 

 

Total share consideration

     1,182.6  

Plus: cash transferred

     343.6  
  

 

 

 

Total cash and share consideration at closing(2)

   $ 1,526.2  
  

 

 

 

 

(1)

The value of shares transferred at closing is assumed to be $10.00 per share. The Business Combination will be accounted for as a reverse recapitalization and therefore any change in the Company’s trading price do not impact the pro forma financial statements because the Company’s net assets acquired at closing will be recorded at their carrying values.

(2)

The aggregate consideration for the Business Combination does not take into account amounts that will be payable to the Vertiv Stockholder under the tax receivable agreement entered into at the closing of the Business Combination. Refer to Note 3(e) for further discussion of the pro forma adjustments related to the tax receivable agreement liability.

Concurrently with the execution of the Merger Agreement, the Company entered into Subscription Agreements with the PIPE Investors pursuant to which the PIPE Investors subscribed for 123.9 million shares of our Class A common stock for an aggregate purchase price equal to $1,239 million (the “PIPE Investment”). The PIPE Investment was consummated substantially concurrently with the closing of the Business Combination. Each of the holders of our Class B common stock agreed to waive the anti-dilution adjustments provided for in the GSAH Certificate of Incorporation applicable to our Class B common stock in connection with the Business Combination, including the PIPE Investment. As a result of such waiver, the 17,250,000 shares of our Class B common stock automatically converted into shares of Class A common stock on a one-for-one basis upon the consummation of the Business Combination.

The $1,239.0 million of gross proceeds from the sale of the Class A common stock to PIPE Investors is included in the Cash Consideration. The remainder of the Cash Consideration was provided by the funds held in the Trust Account. The following summarizes the pro forma Common Stock ownership at September 30, 2019:

 

     Number of
Shares
(millions)
     Percentage of
Outstanding
Shares
 

Vertiv Stockholder

     118.3        36

PIPE Investors

     123.9        38

Public Stockholders

     69.0        21

Initial Stockholders

     17.3        5
  

 

 

    

 

 

 

Pro forma Common stock at September 30, 2019

     328.5        100

 

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The Company may issue incentive awards under the Incentive Plan to the extent these plans are approved by the Company’s shareholders. However, as the number of awards and terms are not yet known, a pro forma adjustment has not been reflected.

In connection with the consummation of the Business Combination, the Company also entered into certain acknowledgement and release agreements pursuant to which participating key employees, including named executive officers, acknowledged that the Business Combination did not constitute a “qualifying event” under the Transaction Exit Bonus Plan (as defined below) and, subject to each individual’s continued employment through the consummation of the Business Combination and agreement to a release of claims, including any rights under the Transaction Exit Bonus Plan, the participating key employees, including named executive officers, were entitled to receive a bonus, payable within thirty days following the Business Consummation. These agreements result in an increase to compensation expense of approximately $20.8 million.

The Company adopted the Incentive Plan in connection with the consummation of the Business Combination. Based on the preliminary terms and estimated stock price, the awards under the plan would result in an increase to compensation expense of approximately $10.0 million to $18.0 million. These amounts may differ based on the final terms and share prices at the time of equity issuances. However, as these equity issuances are preliminary and not yet executed, the Company has not included a pro forma adjustment because such amounts were not deemed factually supportable.

NOTE 2—Basis of the Pro Forma Presentation

The Business Combination will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, GSAH will be treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of Vertiv issuing stock for the net assets of GSAH, accompanied by a recapitalization. The net assets of the Company will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the business combination will be those of Vertiv.

Vertiv has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

 

   

The Vertiv Stockholder will designate four out of nine board members. The Vertiv Stockholder and the Sponsor will mutually approve the designation of three other board members. The Vertiv Stockholder will continue to nominate four board members under the Stockholders Agreement for as long as the Vertiv Stockholder holds more than 30% equity ownership of the Company.

 

   

The Vertiv Stockholder will hold the largest share of voting interests with 37.8%.

 

   

The ongoing senior management of the Company will be entirely comprised of Vertiv employees.

 

   

Vertiv comprises all of the operating activities of the Company.

The unaudited pro forma condensed combined balance sheet as of September 30, 2019 assumes that the Business Combination was completed on September 30, 2019. The unaudited pro forma condensed combined financial statements are based on the historical consolidated financial statements of the Companies and related adjustments. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2018 and the nine months ended September 30, 2019 give pro forma effect to the Business Combination as if they had occurred on January 1, 2018.

The unaudited pro forma condensed combined financial statements do not give effect to any anticipated synergies, operating efficiencies or cost savings that may be associated with the Business Combination.

The pro forma adjustments are based on the information currently available. The assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes.

 

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The unaudited pro forma condensed combined statements of operations are not necessarily indicative of what the actual results of operations would have been had the Business Combination taken place on the date indicated, nor are they indicative of the future consolidated results of operations of the Company. They should be read in conjunction with the historical consolidated financial statements and notes thereto of the Companies.

Upon consummation of the Business Combination, the Company adopted Vertiv’s accounting policies, but we have not identified any significant differences that would impact the financial statements of the Company.

Note 3—Pro Forma Adjustments

The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and has been prepared for informational purposes only. The unaudited pro forma condensed combined statements of operations are not necessarily indicative of what the actual results of operations would have been had the Business Combination taken place on the date indicated, nor is it indicative of the future consolidated results of operations of the Company. The unaudited pro forma condensed combined financial information is based upon the historical consolidated financial statements of the Companies and should be read in conjunction with their historical financial statements.

The historical consolidated financial statements have been adjusted in the unaudited pro forma condensed combined financial information to give effect to pro forma events that are (1) directly attributable to the Business Combination, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on the results of the Company.

There were no significant intercompany balances or transactions between the Companies as of the dates and for the periods of these unaudited pro forma condensed combined financial statements.

The pro forma condensed combined provision for income taxes does not necessarily reflect the amounts that would have resulted had the Companies filed consolidated income tax returns during the periods presented.

The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statements of operations are based upon the number of GSAH’s shares outstanding, assuming the Business Combination occurred on January 1, 2018.

In connection with the Business Combination, a total of one stockholder elected to redeem 250 shares of Class A common stock, representing approximately 0.0% of the Company’s issued and outstanding Class A common stock.

Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet

 

  (a)

Reflects the net adjustment to cash associated with the PIPE Investment and Business Combination (dollars in millions). The actual uses of proceeds at closing (which are described elsewhere in this prospectus) differed from the table below with respect to the paydown of Vertiv debt, the payment to selling equityholders, and the payment of Company expenses. The differences were primarily related to the reduction of the payment to selling equityholders driven by planned seller paid closing costs and payments under the Transaction Exit Bonus Plan. The differences were determined to be immaterial to the pro forma condensed combined balance sheet and statements of operations.

 

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Sources:

  

Cash inflow from PIPE Investment

   $ 1,239.0 (1) 

Cash inflow from Company’s Trust Account

     705.0 (2) 
  

 

 

 

Cash inflow from business combination

     1,944.0  

Uses:

  

Paydown of Vertiv debt

     1,479.0 (3) 

Payment to selling equityholders

     415.0 (4) 

Payment of Company expenses

     50.0 (5) 
  

 

 

 

Cash outflow from business combination

     1,944.0  
  

 

 

 

Net pro forma cash flow

   $ —    

 

(1)

Represents the issuance of 123.9 million shares of Class A common stock through the PIPE Investment at a par value of $0.0001 per share and an assumed fair value of $10.00 per share.

(2)

Reflects the reclassification of cash equivalents held in the trust account inclusive of accrued dividends and to reflect that the cash equivalents are available to effectuate the Business Combination or to pay redeeming Company stockholders.

(3)

Reflects the cash prepayment of the Term Loan Facility principal amount from $2,070.0 to $591.0.

(4)

Reflects the net cash consideration paid to or on behalf of the Vertiv Stockholder. Under the terms of the Merger Agreement, this amount will be contingent upon, amongst other items, the amount of funds from the trust account that will be used to pay redeeming GSAH stockholders.

(5)

Represents the payment of deferred underwriter fees of $24.2 and an estimated $25.8 acquisition-related transaction costs. Acquisition-related transaction costs and related charges are not included as a component of consideration to be transferred but are required to be charged against the proceeds from the PIPE Investment and the trust account. The unaudited pro forma condensed balance sheet reflects these costs as a reduction of cash with a corresponding decrease to Additional paid in capital.

 

  (b)

Represents the relief of restrictions on the investments and cash held in the Trust Account upon consummation of the Business Combination.

 

  (c)

Represents funds from the Business Combination used to prepay the Term Loan Facility to the lender under the terms of the Merger Agreement resulting in a projected total net debt balance of approximately $2,060.1 on the date of the Business Combination.

 

Long-term debt, reduction of principal

   $ (1,479.0

Accelerated amortization of debt issuance costs and discount

     59.6  
  

 

 

 

Reduction of long-term debt

   $ (1,419.4
  

 

 

 

Due to the full valuation allowance in the U.S., there is no related tax benefit associated with the accelerated amortization of debt issuance cost and discount.

Because the accelerated amortization of debt issuance costs will not have an ongoing impact to the statement of operations, there are no corresponding adjustments to the pro forma condensed combined statement of operations.

 

  (d)

Represents the $24.2 payment of underwriting costs incurred as part of the Company’s IPO committed to be paid upon the consummation of a business combination.

 

  (e)

Represents the estimated payable to the Vertiv Stockholder under the Tax Receivable Agreement. The Tax Receivable Agreement will generally provide for the payment by us to the Vertiv Stockholder of 65% of the cash tax savings realized (or deemed realized) over a 12-year period after the closing of the Business Combination as a result of certain pre-existing tax assets and attributes of Vertiv. In the twelfth year of the Tax Receivable Agreement, an additional payment would be made to the Vertiv Stockholder based on 65% of the remaining tax benefits that have not been realized. The timing of expected future payments under the Tax Receivable Agreement are dependent upon various factors, including the existing tax bases at the time of the Business Combination, the realization of tax benefits,

 

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  and changes in tax laws. However, as the Company is obligated to settle the remaining tax benefits after 12 years, the Company has concluded that the liability should be measured at fair value. The Company has estimated total payments of approximately $196.7. The pro forma adjustment represents the initial fair value of the estimated liability of $112.2 based on the expected tax attributes at closing, projections of future tax payments and an applicable discount rate. These estimates and assumptions
  are subject to change, which may materially affect the measurement of the liability. See “Business Combination—Related Agreements—Tax Receivable Agreement” for further discussion of the expected payments due under the Tax Receivable Agreement. Changes in the fair value of the Tax Receivable Agreement liability are expected in future periods. However, as the nature and magnitude of changes in fair value cannot be determined, a pro forma adjustment has not been reflected in the pro forma income statement.

 

  (f)

Common stock adjustments include the 17,250,000 shares of Class B common stock converted into shares of Class A common stock on a one-for-one basis upon the consummation of the Business Combination at a par value of $0.0001 per share and the issuance of Class A common stock to the PIPE Investors and Vertiv Stockholder at par value of $0.0001 per share.

Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations

The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the nine month period ended September 30, 2019 and for the year ended December 31, 2018 are as follows:

 

  (g)

To eliminate GSAH’s dividend income on the trust account and related tax impact.

 

  (h)

Represents the reduction of interest expense related to the prepayment of the Term Loan Facility principal amount from $2,070.0 to $591.0 at a 6.00% interest rate (LIBOR + 4.00%).

 

  (i)

Due to the full valuation allowance in the U.S., the only pro forma adjustment is to reverse the tax on the GSAH dividend income.

 

  (j)

Pro forma earnings per share:

 

     Nine months
ended
September 30,
2019
    Year ended
December 31,
2018
 

Pro forma net income (loss)

   $ (23.4   $ (220.1
  

 

 

   

 

 

 

Historical Weighted average number of shares outstanding—basic and diluted

     69,000,000       69,000,000  

Class A common stock issued to Vertiv Stockholder

     118,261,955       118,261,955  

Class A common stock issued to PIPE Investors

     123,900,000       123,900,000  

Class B common stock converted to Class A common stock

     17,250,000       17,250,000  

Class A redemptions

     —         —    
  

 

 

   

 

 

 

Pro forma weighted average number shares outstanding

     328,411,955       328,411,955  

Pro forma net income (loss) per share of common stock—basic and diluted(1)

   $ (0.07   $ (0.67

 

(1)

At September 30, 2019, GSAH had outstanding warrants to purchase up to 33,533,317 shares of Class A common stock. One whole warrant entitles the holder thereof to purchase one share of Class A common stock at a price of $11.50 per share. GSAH’s warrants are anti-dilutive on a pro forma basis and have been excluded from the diluted number of the Company’s shares of Class A common stock and warrants outstanding at the time of closing.

 

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Selected Unaudited Pro Forma Financial Information

(Dollars in millions except per share data)

 

     Pro Forma Combined  

Statement of Operations Data—Nine Months Ended September 30, 2019

  

Net Sales

   $ 3,259.7  

Loss from continuing operations

   $ 23.4  

Pro Forma weighted average common shares outstanding—basic and diluted

     328,411,955  

Pro Forma net income (loss) per share basic and diluted

   $ (0.07

Statement of Operations Data—Year Ended December 31, 2018

  

Net Sales

   $ 4,285.6  

Loss from continuing operations

   $ 220.1  

Pro Forma weighted average common shares outstanding—basic and diluted

     328,411,955  

Pro Forma net income (loss) per share basic and diluted

   $ (0.67

Balance Sheet Data—As of September 30, 2019

  

Total current assets

   $ 1,963.9  

Total assets

   $ 4,611.8  

Total current liabilities

   $ 1,472.5  

Total liabilities

   $ 4,001.4  

Total equity

   $ 610.4  

 

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COMPARATIVE PER SHARE INFORMATION

The following table sets forth:

 

   

historical per share information of GSAH for the year ended December 31, 2018 and for the nine months ended September 30, 2019; and

 

   

unaudited pro forma per share information of the Company for the fiscal year ended December 31, 2018 and the nine months ended September 30, 2019, after giving effect to the Business Combination.

The pro forma book value, net income (loss) and cash dividends per share information reflect the Business Combination contemplated by the Merger Agreement as if it had occurred on January 1, 2018. The following table is also based on the assumption that there are no adjustments for the outstanding warrants issued by GSAH as such securities are not exercisable until 30 days after the closing of the Business Combination.

The historical information should be read in conjunction with “Selected Consolidated Historical Financial Information of Vertiv Holdings,” “Selected Historical Financial Information of GSAH,” and “Vertiv Holdings’ Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this prospectus and the audited historical financial statements and the related notes of Vertiv Holdings and GSAH contained elsewhere in this prospectus. The unaudited pro forma condensed combined share information is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial information and related notes included elsewhere in this prospectus. The unaudited pro forma condensed combined net income per share information below does not purport to represent our actual results of operations giving effect to the Business Combination or to project our results of operations that may be achieved after the Business Combination. The unaudited pro forma book value per share information below does not purport to represent our actual book value giving effect to the Business Combination nor the book value per share for any future date or period.

 

     Vertiv
historical(2)
     GSAH
historical
     Pro Forma
Combined
 

As of and for the Nine months ended September 30, 2019

        

Book value per share(1)

     n/a      $ 0.07      $ 1.81  

Net income (loss) per share—basic and diluted

     n/a        0.09        (0.07

Weighted average shares outstanding—basic and diluted

     n/a        69,000,000        328,411,955  

As of and for the Twelve months ended December 31, 2018

        

Net income (loss) per share—basic and diluted

     n/a        0.06        (0.67

Weighted average shares outstanding—basic and diluted

     n/a        69,000,000        328,411,955  

 

(1)

Book value per share = Total equity / Total basic and diluted outstanding shares.

(2)

Historically, as a private limited liability company, Vertiv has not calculated net earnings (loss) per share.

 

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BUSINESS COMBINATION

This subsection describes the material provisions of the certain agreements entered into in connection with the Business Combination, but does not purport to describe all of the terms of such agreements. The following summary is qualified in its entirety by reference to the complete text of such agreements, copies of which are included as exhibits to the registration statement of which this prospectus is a part.

Summary of the Business Combination

On the Closing Date, Vertiv Holdings Co (formerly known as GS Acquisition Holdings Corp), consummated the Business Combination pursuant to that certain Merger Agreement, by and among GSAH, Vertiv Holdings, the Vertiv Stockholder, the First Merger Sub and the Second Merger Sub. As contemplated by the Merger Agreement, (1) First Merger Sub merged with and into Vertiv Holdings, with Vertiv Holdings continuing as the surviving entity and (2) immediately following the First Merger and as part of the same overall transaction as the First Merger, Vertiv Holdings merged with and into Second Merger Sub, with Second Merger Sub continuing as the surviving entity and renamed “Vertiv Holdings, LLC.” As a result of the consummation of the Business Combination, (a) the Company directly owns all of the equity interests of Vertiv Holdings, LLC and indirectly owns the equity interests of its subsidiaries and (b) the Vertiv Stockholder, the sole equity owner of Vertiv Holdings prior to the Business Combination, now holds 118,261,955 shares of our Class A common stock. In connection with the Business Combination, the registrant changed its name from GS Acquisition Holdings Corp to “Vertiv Holdings Co”.

On February 6, 2020, GSAH’s stockholders, at a special meeting of GSAH, approved and adopted the Merger Agreement, and approved the Business Combination proposal and the other related proposals presented in the Proxy Statement.

The Merger Consideration was approximately $1.5 billion, approximately $342 million of which was paid in cash and the remainder was paid in stock consisting of approximately 118,261,955 million Stock Consideration Shares. The Stock Consideration Shares were valued at $10.00 per share for purposes of determining the aggregate number of shares of our Class A common stock payable to the Vertiv Stockholder as part of the Merger Consideration. In addition, the Vertiv Stockholder is entitled to receive additional future cash consideration with respect to the Business Combination in the form of amounts payable under the Tax Receivable Agreement (as defined below).

Concurrently with the execution of the Merger Agreement, the Company entered into the Subscription Agreements with the PIPE Investors, pursuant to which the PIPE Investors collectively subscribed for 123,900,000 PIPE Shares for an aggregate purchase price equal to $1,239,000,000. The PIPE Investment was consummated in connection with the consummation of the Business Combination. See “—Related Agreements” below for a summary of the Subscription Agreement. Each of the Initial Stockholders, agreed to waive the anti-dilution adjustments provided for in GSAH’s Certificate of Incorporation, which were applicable to the founder shares. As a result of such waiver, the 17,250,000 founder shares automatically converted from shares of our Class B common stock into shares of our Class A common stock on a one-for-one basis upon the consummation of the Business Combination.

On the Closing Date, in connection with the Business Combination, we entered into certain related agreements including the Tax Receivable Agreement, Amended and Restated Registration Rights Agreement and the Stockholders Agreement (each of which is described below).

Related Agreements

Amended and Restated Registration Rights Agreement

On the Closing Date, we entered into the Amended and Restated Registration Rights Agreement, with our Initial Stockholders, the Vertiv Stockholder, the GS ESC PIPE Investor, the Cote PIPE Investor and certain other

 

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PIPE Investors (collectively, with each other person who has executed and delivered a joinder thereto, the “RRA Parties”), pursuant to which the RRA Parties are entitled to registration rights in respect of certain shares of the Company’s Class A common stock and certain other equity securities of the Company that are held by the RRA Parties from time to time.

The Amended and Restated Registration Rights Agreement provides that the Company will as soon as practicable but no later than the later of (i) 45 calendar days following the consummation of the Business Combination and (ii) 90 calendar days following the Company’s most recent fiscal year end, file with the SEC a shelf registration statement pursuant to Rule 415 under the Securities Act registering the resale of certain shares of the Company’s Class A common stock and certain other equity securities of the Company held by the RRA Parties and will use its commercially reasonably efforts to have such shelf registration statement declared effective as soon as practicable after the filing thereof, but no later than the earlier of (x) the 90th calendar day following the filing date if the SEC notifies the Company that it will “review” such shelf registration statement and (y) the 10th business day after the date the Company is notified in writing by the SEC that such shelf registration statement will not be “reviewed” or will not be subject to further review.

Each of the GS Sponsor Member, the Cote Sponsor Member and the Vertiv Stockholder is entitled to make up to two demand registrations in any 12 month period in connection with an underwritten shelf takedown offering, in each case subject to certain offering thresholds, applicable lock-up restrictions and certain other conditions. In addition, the RRA Parties have certain “piggy-back” registration rights. The Amended and Restated Registration Rights Agreement includes customary indemnification and confidentiality provisions. The Company will bear the expenses incurred in connection with the filing of any registration statements filed pursuant to the terms of the Amended and Restated Registration Rights Agreement.

Stockholders Agreement

On the Closing Date, the Company, the GS Sponsor Member, the Cote Sponsor Member and the Vertiv Stockholder entered into the Stockholders Agreement. The Stockholders Agreement provides that the Vertiv Stockholder may not transfer its Stock Consideration Shares until August 5, 2020, subject to exceptions allowing for certain transfers to related parties and transfers in connection with extraordinary transactions by the Company.

Pursuant to the Stockholders Agreement, the Vertiv Stockholder has the right to nominate up to four directors to our Board of Directors, subject to its ownership percentage of the total outstanding shares of Class A common stock. If the Vertiv Stockholder holds: (i) 30% or greater of the outstanding Class A common stock, it will have the right to nominate four directors (two of which must be independent); (ii) less than 30% but greater than or equal to 20% of the outstanding Class A common stock, it will have the right to nominate three directors (one of which must be independent); (iii) less than 20% but greater than or equal to 10% of the outstanding Class A common stock, it will have the right to nominate two directors; (iv) less than 10% but greater than or equal to 5% of the outstanding Class A common stock, it will have the right to nominate one director; and (iv) less than 5% of the outstanding Class A common stock, it will not have the right to nominate any directors. As long as the Vertiv Stockholder has the right to nominate at least one director, the Vertiv Stockholder shall have certain rights to appoint its nominees to committees of the Board of Directors and the Company shall take certain actions to ensure the number of directors serving on the Board of Directors does not exceed nine. In addition, the Stockholders Agreement provides that so long as the Company has any Executive Chairman or Chief Executive Officer as a named executive officer, the Company shall take certain actions to include such Executive Chairman or Chief Executive Officer on the slate of nominees recommended by the Board of Directors for election. The Stockholders Agreement also provides that, for so long as the Vertiv Stockholder holds at least 5% of our outstanding Class A common stock, the Vertiv Stockholder will have the right to designate an observer to attend meetings of the Board, subject to certain limitations.

 

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Tax Receivable Agreement

On the Closing Date, the Company entered into the Tax Receivable Agreement, which generally provides for the payment by us to the Vertiv Stockholder of 65% of the cash tax savings in U.S. federal, state, local and certain foreign taxes, that we actually realize (or are deemed to realize) in periods after the closing of the Business Combination as a result of (i) increases in the tax basis of certain intangible assets of Vertiv resulting from certain pre-Business Combination acquisitions, (ii) certain U.S. federal income tax credits for increasing research activities (so-called “R&D credits”) and (iii) tax deductions in respect of certain Business Combination expenses. We expect to retain the benefit of the remaining 35% of these cash tax savings.

For purposes of the Tax Receivable Agreement, the applicable tax savings will generally be computed by comparing our actual tax liability for a given taxable year to the amount of such taxes that we would have been required to pay in such taxable year without the tax basis in the certain intangible assets, the U.S. federal income tax R&D credits and the tax deductions for certain Business Combination expenses described above. Except as described below, the term of the Tax Receivable Agreement will continue for twelve taxable years following the closing of the Business Combination. However, the payments described in (i) and (ii) above will generally be deferred until the close of our third taxable year following the closing of the Business Combination. The payments described in (iii) above will generally be deferred until the close of our fourth taxable year following the closing of the Business Combination and then payable ratably over the following three taxable year period regardless of whether we actually realize such tax benefits. Payments under the Tax Receivable Agreement are not conditioned on the Vertiv Stockholder’s continued ownership of our stock.

Under certain circumstances (including a material breach of our obligations, certain actions or transactions constituting a change of control, a divestiture of certain assets, upon the end of the term of the Tax Receivable Agreement or, after three years, at our option), payments under the Tax Receivable Agreement will be accelerated and become immediately due in a lump sum. In such case, the payments due upon acceleration would be based on the present value of our anticipated future tax savings using certain valuation assumptions, including that we and our subsidiaries will generate sufficient taxable income to fully utilize the applicable tax assets and attributes covered under the Tax Receivable Agreement (or, in the case of a divestiture of certain assets, the applicable tax attributes relating to such assets). Consequently, it is possible in these circumstances that the actual cash tax savings realized by us may be significantly less than the corresponding Tax Receivable Agreement payments we are required to make at the time of acceleration. Furthermore, the acceleration of our obligations under the Tax Receivable Agreement could have a substantial negative impact on our liquidity. Additionally, the obligation to make payments under the Tax Receivable Agreement, including the acceleration of our obligation to make payments in the event of a change of control, could make us a less attractive target for a future acquisition.

While the timing of any payments under the Tax Receivable Agreement will vary depending upon the amount and timing of our taxable income, we expect that the payments that we will be required to make under the Tax Receivable Agreement could be substantial. Payments under the Tax Receivable Agreement will be based on the tax reporting positions that we determine, and such tax reporting positions are subject to challenge by taxing authorities. Payments made under the Tax Receivable Agreement will not be returned upon a successful challenge by a taxing authority to our reporting positions, although such excess payments made to the Vertiv Stockholder may be netted against payments otherwise to be made to the Vertiv Stockholder after our determination of such excess. Any payments made by us under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to us.

Subscription Agreements

Pursuant to the Subscription Agreements, the PIPE Investors purchased an aggregate of 123,900,000 shares of Class A common stock in a private placement for a price of $10.00 per share for an aggregate purchase price of approximately $1,239,000,000.

 

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The shares of Class A common stock issued in connection with the Subscription Agreements (the “PIPE Shares”) were not registered under the Securities Act, and were issued in reliance on the exemption from registration requirements thereof provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.

The Subscription Agreements for the PIPE Investors (other than (1) the PIPE Investors who are RRA Parties, whose registration rights are governed by the Amended and Restated Registration Rights Agreement, and (2) Subscribing Vertiv Executives) (the “Non-Sponsor PIPE Investors”) provide for certain registration rights. In particular, the Company is required to, as soon as practicable but no later than, (i) 45 calendar days following the closing date of the Business Combination and (ii) 90 calendar days following the Company’s most recent fiscal year end, file with the SEC (at the Company’s sole cost and expense) a registration statement registering the resale of such shares, and will use its commercially reasonable efforts to have such registration statement declared effective as soon as practicable after the filing thereof, but no later than the earlier of (i) the 90th calendar day following the actual filing date if the SEC notifies the Company that it will “review” such registration statement and (ii) the 10th business day after the date the Company is notified in writing by the SEC that such registration statement will not be “reviewed” or will not be subject to further review. Such registration statement is required to be kept effective for at least two years after effectiveness or until the shares thereunder have been sold by the Non-Sponsor PIPE Investors. In addition, the Non-Sponsor PIPE Investors that purchase shares for an aggregate purchase price in excess of $100,000,000 also will be entitled to make up to two demands in the aggregate for traditional underwritten registrations, plus up to two demands in the aggregate for block trades, in any 12 month period immediately following the closing date of the Business Combination, in each case subject to certain thresholds, and will have certain “piggy-back” registration rights.

 

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BUSINESS

Unless the context otherwise requires, all references in this subsection to the “Company,” “we,” “us” or “our” refer to Vertiv Holdings Co and its consolidated subsidiaries following the Business Combination, other than certain historical information which refers to the business of Vertiv prior to the consummation of the Business Combination.

Who we are

We are a global leader in the design, manufacturing and servicing of critical digital infrastructure technology that powers, cools, deploys, secures and maintains electronics that process, store and transmit data. We provide this technology to data centers, communication networks and commercial & industrial environments worldwide.

We aim to help create a world where critical technologies always work, and where we empower the vital applications of the digital world.

Our business

We have a suite of comprehensive offerings, innovative solutions and a leading service organization that supports a diversified group of customers, which we deliver from engineering, manufacturing, sales and service locations in more than 45 countries across the Americas, Asia Pacific and EMEA. We provide the hardware, software and services to facilitate an increasingly interconnected marketplace of digital systems where large amounts of indispensable data need to be transmitted, analyzed, processed and stored. Whether this growing quantity of data is managed centrally in hyperscale/cloud locations, distributed at the so-called “edge” of the network, processed in an enterprise location or managed via a hybrid platform, the underpinnings of all those locations rely on our critical digital infrastructure and services.

We have a broad range of offerings, which include power management products, thermal management products, integrated rack systems, modular solutions, and management systems for monitoring and controlling digital infrastructure. These comprehensive offerings are integral to the technologies used for a number of services, including e-commerce, online banking, file sharing, video on-demand, energy storage, wireless communications, IoT and online gaming. In addition, through our global services network, we provide lifecycle management services, predictive analytics and professional services for deploying, maintaining and optimizing these products and their related systems.

Our primary customers are businesses across three main end markets: (1) data centers (including hyperscale/cloud, colocation, enterprise and edge), (2) communication networks and (3) commercial and industrial environments. Within these areas we serve a diverse array of industries, including social media, financial services, healthcare, transportation, retail, education and government. We approach these industries and end users through our global network of direct sales professionals, independent sales representatives, channel partners and original equipment manufacturers. Many of our installations are completed in collaboration with our customers and we work with them from the initial planning phase through delivery and servicing of the completed solution. This depth of interaction supports key customer relationships, sometimes spanning multiple decades. Our most prominent brands include Liebert, NetSure, Geist and Avocent.

Our business is organized into three segments according to our main geographic regions—the Americas, Asia Pacific and EMEA—and we manage and report our results of operations across these three business segments. For the nine months ended September 30, 2019, our revenue was $3,259.7 million, of which 51% was transacted in the Americas; 28% was transacted in Asia Pacific; and 21% was transacted in EMEA as compared with our revenue for the nine months ended September 30, 2018 of $3,114.0 million. For the year ended December 31, 2018, our revenue was $4,285.6 million, of which 50% was transacted in the Americas, 29% was

 

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transacted in Asia Pacific, and 21% was transacted in EMEA, and such revenue reflected an increase of $406.2 million, or 10.5%, as compared with our revenue for the year ended December 31, 2017 of $3,879.4 million.

Our strengths

We are a customer-focused organization and have a host of strengths that allow us to act quickly and with agility to best serve our customers’ needs, including:

 

   

Stable Platform for Growth: We are well-positioned in the global marketplace as a key provider of critical digital infrastructure across several diverse areas, but with a uniform product set. We are able to provide multi-national customers with the ability to purchase and maintain a similar product set or technology in Asia as in the United States or the European Union and this focused approach to our served industries allows us to deploy capital and resources quickly and efficiently. In addition to our global building block approach to products, we also have a natural diversification that comes from serving various types of data center customers (including hyperscale/cloud, colocation, enterprise and edge locations), communication networks (including core and access sites) and commercial & industrial verticals (such as manufacturing and transportation). This diversification reduces our exposure to industry-specific market volatility and our geographical reach reduces our exposure to individual country or regional economic uncertainty. These factors help to stabilize our resilient business model.

 

   

Global Service Organization: Having a global service organization allows us to interface and support our customers in each phase of the product lifecycle. Our lifecycle services for our customers begin at the sales process for our products, continue through the installation and preventative maintenance of such products, and are maintained through a full suite of performance and predictive service applications which are utilized by our customers through the entire lifecycle of such products. Additionally, our service network acts as a global feedback mechanism, helping us improve our products, understand and address changing local/regional businesses and develop new technologies and solutions for our customers. The majority of our service revenue is derived from annuity-type contracts.

 

   

“Local Everywhere” Capabilities: Our “local everywhere” approach to doing business helps us to address our customers’ region-specific needs as it promotes customer intimacy, improves our agility, increases our response times, and well-positions us to meet the varying local and regional requirements of our global customer base. As of September 30, 2019, we had sales support, engineering and manufacturing capabilities, as well as approximately 3,000 customer support employees (including over 2,700 field engineers and over 300 technical support representatives) strategically located across each of our three geographic segments of the Americas, Asia Pacific and EMEA, and a network of over 19,700 employees and significant facilities across the globe, which provide us with a wide capability to service our customers and help us understand our customers’ needs, which is fundamental to supporting long-term customer relationships.

 

   

Deep Domain Knowledge: As a result of our decades of experience in the industry, our customers have come to rely on our understanding of trends, underlying technologies, deployment types and the implementation of our offerings. Our ability to apply these insights to our customers’ utilization of our technology is a key differentiator as compared to our competitors within these same markets. Our decades of customer intimacy and numerous marketplace touch points with our customers, beginning at the start of the sales process and extending through the entire product life cycle, allow us to have deep technical discussions and solve vital customer problems.

 

   

Comprehensive Integrated Solutions: We offer specialized and comprehensive solutions by combining our leading products with third-party hardware. These solutions span standard configurations that can be placed in a technology closet at edge data centers, through

 

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configured-to-order solutions for medium-sized applications, up to custom-designed solutions to serve a data center colocation or hyperscale site. As the key provider of many of the components of this solution set, we differentiate ourselves from our competitors from both a supply chain and a technology perspective and become integrated in the customers’ core design planning.

 

   

Innovative Mentality: Our business has been built on a track record of innovation. Over the decades, we have been instrumental in shaping the thermal and power management markets, consistently bringing forth new products, services and solutions to an ever growing customer base. Innovation occurs at all levels of our business and we dynamically adapt our offerings to help customers solve their key issues. We plan to continue to innovate across our products, services and industries in order to optimize our offerings for our customers.

 

   

Accomplished Management Team: Our management team is made up of industry professionals and transformational leaders with over 100 years of combined industry experience. Our Chief Executive Officer, Rob Johnson, has successfully led public companies in the past and has over 30 years of experience in the industry. The management team that supports Mr. Johnson is customer-focused, fast-acting, commercially savvy, digitally astute and promotes the core Vertiv values on a daily basis.

Industry

Global data center IP traffic is estimated to grow at a CAGR of 21% from 2018 to 2021. This strong demand for data is being driven by businesses and consumers alike. The need for ubiquitous connectivity (being connected on any device, at anytime, anywhere) is a key driver of the markets we serve and is fueled by applications such as video on-demand, online banking, social media, IoT and digital health among others. All of this activity yields a continued growth in data processing, storage and networking as the world continues to become more reliant on the analysis and delivery of digital content.

Below is some key data that demonstrates this growth (graphics follow):

Data Boom: Key Driver of End-Market Growth

Increased Digitization, Multiple Device Connection Adoption, and IoT

LOGO

Our primary customers are businesses across three main end markets: (1) data centers (including hyperscale/cloud, colocation, enterprise and edge), (2) communication networks and (3) commercial and industrial environments.

 

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Data Centers: The primary purpose of a data center is to process, store and distribute data. There are a host of different sizes and types of data centers, but primarily they can be broken down into the following classifications:

 

   

Cloud/Hyperscale: These facilities are massive in scale and are primarily used to support off-premise cloud applications. This portion of the industry is growing rapidly. Examples of companies in this space include Microsoft Azure, Amazon Web Services, and Google Cloud.

 

   

Colocation: These facilities range in size and offer users a location where they can place their IT equipment, while the building and critical digital infrastructure is owned by the colocation company. This portion of the industry is growing rapidly. Examples of companies in this space include Digital Realty and Equinix.

 

   

Enterprise: This classification refers to the “Fortune 1000” type businesses that have their own on-premises data centers. Examples of companies in this space include Goldman Sachs, J.P. Morgan, Walmart and Cleveland Clinic. The enterprise segment represents approximately 70% of the data center business. We have found that the growth of the enterprise market, based on data centers and square footage, has generally been flat for the past 3 years.

 

   

Edge: These types of data centers are at the infancy stage of their development and will be utilized by all of the aforementioned categories in the future. These locations are decentralized by nature and located closer to where the data is being demanded (i.e., towards the edge of the network). This market is small today, but the opportunities for growth in this space are expected to increase as the proliferation of connected devices and data storage needs continue to grow in the future.

Our management estimates that approximately 70% of our revenues for the fiscal year-ended December 31, 2018 are attributable to customers across the data center end market.

Communication Networks: This space is comprised of wireline, wireless and broadband companies. These companies create content and are ultimately responsible for distributing voice, video and data to businesses and consumers. They deliver this data through an intricate network of wireline and wireless mediums. Additionally, some of these companies’ locations act as data centers where the data is delivered and also processed and stored. This sector has a generally low single-digit growth profile. Our management estimates that approximately 20% of our revenues for the fiscal year ended December 31, 2018 are attributable to customers across the communication networks end market.

Commercial/Industrial: This space is comprised of those applications that are tied to a company’s critical systems. Examples include transportation, manufacturing, oil and gas, etc. These applications are growing in their need for intelligent infrastructure and may be regulated or need to pass some level of compliance. The growth in this area generally tracks Growth Domestic Product. Our management estimates that approximately 10% of our revenues for the fiscal year ended December 31, 2018 are attributable to customers across the commercial and industrial end market.

Our Strategy

We strive to create value for our stockholders through organic growth and strategic acquisitions, lean initiatives to cut costs and the hiring and retaining of top talent. We believe the culture and values being instilled in the organization (such as acting with speed, transparency and focus on the customer) propel us to deliver value for all of our constituents.

Our goal is to enable the vital applications of the digital world by anticipating and solving the needs of our customers in this increasingly connected global landscape. We expect to continue achieving growth and creating value through several strategic initiatives:

 

   

Customer centricity: Everything we do starts with the customer. Understanding our customers’ markets, needs and strategies enables significant and earlier engagement with such customers during

 

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the selling cycle. We have multiple touch points with customers through a product’s life cycle, which positions our organization to best address our customers’ critical application needs. This customer focused strategy aligns every team in our organization, from sales to engineering to supply chain.

 

   

Leadership in Technology: Vertiv is on the forefront of technological development within our core businesses of critical digital infrastructure. We innovate at the individual product level in order to increase efficiency, reduce our product’s carbon footprint and enhance ease of use for our customers. Two examples of this technology leadership are our new eXL S1 power product and our DSE thermal product. Both of these offerings are leading products in the market from an efficiency, footprint and ease-of-use standpoint. Further, we are developing smart technology and continue to build an ecosystem that allows for interconnectivity between our products, our services and our customers. Additionally, our investment in data analytics and software will allow us and our customers to be smarter and more predictive around the critical digital infrastructure. In order to maintain our technology leadership, we will continue to invest in premier engineering talent and invest in developing next-gen cutting-edge technology.

 

   

Acquisition pipeline: We have in the past pursued, and intend in the future to pursue, acquisitions that will enhance and diversify our portfolio of offerings and capabilities. Given our existing diversified platform, we are able to target companies across a range of competencies and verticals. We will look for companies that: (i) increase our presence in the hyperscale/cloud, colocation and edge universe; (ii) bolster our service and solutions platform; and (iii) help leverage our technologies in adjacent markets such as energy storage. For example, our recent acquisitions of Geist, a leading manufacturer of rack power distribution units, and Energy Labs, a leading provider of direct and indirect air handling systems and modular data center solutions, will help to expand our hyperscale/cloud and colocation offerings, increase our solutions capabilities, and provide further edge offerings for our customers.

 

   

Continue to optimize our operational model and cost structure: We have in the past pursued, and intend in the future to pursue, opportunities to improve our operations and eliminate redundant and unnecessary costs. For example, we continue to build out the Vertiv Operating System to transform the business and deliver value to the customer. This system is rooted in always putting the customer first, building an outstanding culture, and maintaining an intense focus on continuously improving. The tools we utilize allow for lean implementation, better on-time delivery, direct and indirect supply chain saving and productivity improvements.

 

   

Grow and expand in key customers: Our key customer program focuses on those global and regional accounts that we believe most benefit from our value proposition. Many of these accounts are large cloud or colocation customers, as well as communication networks and vertical customers. We look to further expand our presence and opportunities with these clients as we believe their growth trajectories will outpace the traditional market growth.

 

   

Continue building a customer centered culture: We believe that in order to maintain our strong customer relationships, we must have a deeply customer centric culture; exhibit accountability; and act with speed and purpose in addressing customer needs.

Our offerings

We design, manufacture and service critical digital infrastructure technology for data centers, communication networks and commercial/industrial environments. Our principal offerings include:

 

   

Critical infrastructure & solutions

We identify delivery of products as performance obligations within the critical infrastructure & solutions offering. Such products include AC and DC power management, thermal management, modular hyperscale type data center sites, as well as hardware for managing IT equipment.

 

   

I.T. and edge infrastructure

 

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Performance obligations within I.T. and edge infrastructure include the delivery of racks, rack power, rack power distribution, rack thermal systems, and configurable integrated solutions.

 

   

Services & software solutions

Services include preventative maintenance, acceptance testing, engineering and consulting, performance assessments, remote monitoring, training, spare parts, and critical digital infrastructure software.

Sales and marketing

Due to the global nature of our customers, we go to market through multiple channels to ensure that we map our coverage to align with our customers’ buying organization. Our primary selling method is direct sales. To accomplish this, we have over 2,300 sales people located around the world. Additionally, we utilize a robust network of channel partners in the form of distributors, IT resellers, value-added retailers and original equipment manufacturers. This network helps extend our reach to all corners of the world in which we operate.

Backlog

Our estimated combined order backlog was approximately $1,400.8 million and $1,527.6 million as of September 30, 2019 and 2018, respectively. Our estimated combined order backlog was approximately $1,502.0 million and $1,314.4 million as of December 31, 2018 and 2017, respectively. Our backlog consists of product and service orders for which we have received a customer purchase order or purchase commitment and which have not yet been delivered. Orders may be subject to cancellation or rescheduling by the customer. The following table shows estimated backlog by business segment at September 30, 2019 and 2018, respectively, and December 31, 2018 and 2017, respectively.

 

     As of September 30,      As of December 31,  

(Dollars in millions)

   2019      2018      2018      2017  

Americas

   $ 673.2      $ 752.6      $ 806.8      $ 613.0  

Asia Pacific

     310.1        316.9        281.3        337.9  

EMEA

     417.5        458.1        413.9        363.5  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Backlog

   $ 1,400.8      $ 1,527.6      $ 1,502.0      $ 1,314.4  
  

 

 

    

 

 

    

 

 

    

 

 

 

The vast majority of the combined backlog as of September 30, 2019 is considered firm and is expected to be shipped within one year. We do not believe that our backlog estimates as of any date are necessarily indicative of revenues for any future period. Backlog estimates are subject to a number of risks. See “Risk factors—Risks relating to our business—We may not realize all of the sales expected from our backlog of orders and contracts.

Due to the variability of shipments under large contracts, customers’ seasonal installation considerations and variations in product mix and in profitability of individual orders, we can experience significant quarterly fluctuations in revenue and operating income. These fluctuations are expected to continue in the future. Consequently, it may be more meaningful to focus on annual rather than interim results.

Research and development

We are committed to outpacing our competitors and being first to market with new product developments and improvements. In 2018, we spent $165.3 million on Research and Development (“R&D”). We use our R&D budget to focus on fostering new product innovation and engineering. We have global product leaders supported by global product lines and engineering organizations to ensure that we continue to be ahead of market trends by leveraging our regional input. These global groups are also supported by in-region product and engineering teams who are responsible for understanding and adapting our offerings to local market and customer requirements. These teams work closely with our sales and service network which allows us to receive and act upon customer feedback to continuously improve our offerings.

 

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Competition

We encounter competition from a variety of areas; however the majority of our competitors are targeted within a specific offering or a specific geographic location. Competition in our markets is primarily on the basis of reliability, quality, price, service and customer relationships. Across our three markets, we encounter two principal types of competitors: niche players and global competitors. We believe we differentiate ourselves through our ability to service customers in each phase of the product lifecycle, our large customer network which allows us to address the local and regional needs of our customer base, our ability to apply our understanding of trends, technologies and the implementation of our offerings to our customers’ utilization of technology and our integration with third party software which allows us to customize solutions according to a particular customer’s needs.

Facilities, operations and supply chain

Being able to serve our customers both on a global and regional level is important, thus that is how we have built our manufacturing footprint. We have significant manufacturing facilities in North and South America, Asia Pacific and EMEA. This well-diversified global network of facilities allows for cost, delivery and inventory optimization. Our manufacturing facilities are supported by regional engineering and configuration centers where, if our customers desire, we can tailor our products to the local market and to our customer’s requirements.

We have established a robust supply chain that is complementary to our manufacturing footprint. In addition to providing high quality service to our customers, this strategy avoids a significant dependence on a particular supplier or region.

Employees

As of September 30, 2019 we had over 19,700 employees operating globally. Management believes that our employee relations are generally favorable. We are headquartered in Columbus, Ohio.

Intellectual property

Our ability to create, obtain and protect intellectual property is important to the success of our business and our ability to compete. We create IP in our operations globally, and we work to protect and enforce our IP rights. We consider our trademarks valuable assets, including well-known marks such as Vertiv, Geist, Liebert, Energy Labs, NetSure and Chloride.

In addition, we integrate licensed third party technology and IP into certain aspects of our products. Although certain third party proprietary IP rights are important to our success, we do not believe we are materially dependent on any particular third party patent of license or group.

As of September 30, 2019 we had 2,592 patents and 564 pending, published or allowed patent applications, and 1,749 registered trademarks and 211 pending trademark applications.

Raw materials

We obtain raw materials and supplies from a variety of sources and generally from more than one supplier. We believe our sources and supplies of raw materials are adequate for our needs.

Environmental, health and safety

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generation and handling of hazardous substances and wastes, human health and safety and the content, composition and takeback of our products. We maintain an environmental, health and safety compliance program, including policies and standards, dedicated staff, and periodic auditing and training. We also have a program for complying with the European Union Restriction on the Use of Certain Hazardous Substances and Waste Electrical and Electronic Equipment Directives, the China Restriction of Hazardous Substances law, the European Union Registration, Evaluation, Authorization and Restriction of Chemicals regulation, and similar requirements.

At sites which we own, lease or operate, or have previously owned, leased or operated, or where we have disposed or arranged for the disposal of hazardous materials, we are currently liable for contamination, and could in the future be liable for additional contamination. We have projects under way at certain current and former manufacturing facilities to investigate and remediate environmental contamination. Compliance with laws regulating contamination and the discharge of materials into the environment or otherwise relating to the protection of the environment has not had a material effect on our capital expenditures, earnings or competitive position. We do not anticipate any material capital expenditures during 2019 for environmental control facilities or other material costs of compliance with environmental, health and safety requirements.

Legal proceedings

In the normal course of business, we are involved in a variety of lawsuits, claims and legal proceedings, including commercial and contract disputes, employment matters, product liability claims, environmental liabilities and intellectual property disputes. See Note 18 to Vertiv Holdings’ combined and consolidated financial statements included elsewhere in this prospectus.

 

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VERTIV HOLDINGS’ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to help you understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion in conjunction with Vertiv Holdings’ consolidated financial statements and related notes thereto included elsewhere in this prospectus. In connection with the Business Combination, Vertiv was determined to be the accounting acquirer.

The statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking statements. These forward-looking statements are based upon current expectations that involve numerous risks and uncertainties, including, but not limited to, the risks and uncertainties described in “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.” Actual results may differ materially from those contained in any forward-looking statements.

Unless the context otherwise requires, all references in this section to “Vertiv,” the “Company,” “we,” “us” or “our” refer to Vertiv Holdings and its consolidated subsidiaries prior to the consummation of the Business Combination. Unless the context otherwise requires or unless otherwise specified, all dollar amounts in this section are in millions.

Overview

Vertiv is a global leader in the design, manufacturing and servicing of critical digital infrastructure technology. Vertiv’s technology powers, cools, deploys, secures and maintains electronics that process, store and transmit data. Vertiv provides this technology to data centers, communication networks and commercial & industrial environments worldwide.

Vertiv aims to help create a world where critical technologies always work, and where it empowers the vital applications of the digital world.

Vertiv offers a broad range of products in both power and thermal management and, through a global service network, Vertiv provides life cycle management services and solutions for deploying, maintaining and optimizing these products and their related systems. Vertiv also offers infrastructure management, monitoring, controls and software solutions for their customers’ critical applications. Vertiv offerings are integral to the technologies used for a number of services, including e-commerce, online banking, file sharing, video on-demand, energy storage, wireless communications, IoT and online gaming.

Vertiv manages and reports results of operations in three business segments: Americas, Asia Pacific and EMEA. For the nine months ended September 30, 2019 Vertiv’s revenue was $3,259.7, of which 51 percent was transacted in the Americas; 28 percent was transacted in Asia Pacific; and 21 percent was transacted in EMEA as compared with revenue for the nine months ended September 30, 2018 of $3,114.0.

Vertiv sells to three primary markets: (1) data centers (hyperscale/cloud, colocation, enterprise, and edge), (2) communication networks and (3) commercial/industrial environments. Within these markets Vertiv serves a diverse array of end-user sectors including financial services, healthcare, digital, telecommunications, retail, education and government. Vertiv approaches these industries and end-users through a global network of direct sales professionals, independent sales representatives, distributors and original equipment manufacturers. Many of Vertiv’s product installations are completed in collaboration with customers, working together through the initial planning phase through delivery and servicing of the completed solution. This depth of interaction supports key customer relationships, sometimes spanning multiple decades for certain customers. Vertiv’s most prominent brands in addition to Vertiv include Liebert, NetSure, Geist and Avocent. Vertiv’s diverse, global customer base includes some of the largest data center providers/owners, social media companies and communication network operators.

 

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Business trends and conditions

Vertiv believes that the business and results of operations will be impacted in the future by various trends and conditions, including the following:

 

   

Growth in data consumption and mobility. Global data center IP traffic is expected to grow at a compounded annual growth rate of 25 percent from 2016 to 2021, and Vertiv expects the growth in data consumption to continue to increase, in particular the consumption of data on mobile devices, which is expected to reach 77.5 EB per month by 2022. While this macro-level trend does not have a direct correlation to demand for Vertiv offerings in any particular period, Vertiv believes that it does present a positive underlying macro-level trend that indicates the potential for a healthy market for the business. Vertiv expects this increasing demand for data to lead to increased capital spending on data centers (hyperscale/cloud, colocation and traditional enterprise) and communication networks. Although Vertiv has historically been overexposed to the enterprise portion of the data center end market which, based on the number of data centers and square footage, has experienced generally flat growth for the past 3 years, it has shifted focus on growth in the growing portions of the data center end market. However, significant capital spending by either the data center or the communication networks markets can occur in specific periods, and then reduce until their next project. As such, while Vertiv expects demand for its offerings to respond to increased data center demand due to increased data usage generally, a direct correlation in any specific quarter is challenging. The discussion in the results of operations section below illustrates how these variations in periodic spending can impact revenues year-over-year.

 

   

Economic and government activity in China. Vertiv anticipates that China will continue to have positive gross domestic product growth for the foreseeable future. However, China is expected to experience pricing pressures, and Vertiv will need to manage carefully to benefit from China’s growth. Additionally, the level of government involvement is high and somewhat unpredictable in key sectors, such as data centers and communication networks. While Vertiv has strategies to address these situations, the government’s continued role in the markets could be disruptive.

Our business segments

Vertiv tracks and manages the business in three business segments: Americas; Asia Pacific; and Europe, Middle East & Africa.

Americas includes data center, communication networks and commercial/industrial products and services sold for applications in North America and Latin America. This segment’s principal offerings include:

 

   

Critical infrastructure and solutions includes AC and DC power management, thermal management, modular hyperscale type data center sites, as well as hardware for managing IT equipment;

 

   

Services and software solutions includes preventative maintenance, acceptance testing, engineering and consulting, performance assessments, remote monitoring, training, spare parts, and critical digital infrastructure software; and

 

   

I.T. and edge infrastructure includes racks, rack power, rack power distribution, rack thermal systems, and configurable integrated solutions.

Asia Pacific includes products and services sold for applications within the data center, communication networks and commercial/industrial markets throughout China, India and the rest of Asia. Products and services offered are similar to the Americas segment.

Europe, Middle East & Africa includes products and services sold for applications within the data center, communication networks and commercial/industrial markets throughout EMEA. Products and services offered are similar to the Americas segment.

 

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The Separation

On July 29, 2016, Vertiv Group, Vertiv JV Holdings, LLC (“JV Holdings”), Vertiv Holdings, and ASCO Power GP LLC (“ASCO Power,” and together with JV Holdings, Vertiv Holdings and Vertiv Group, the “Buyer Parties”) and Emerson entered into a transaction agreement (the “Transaction Agreement”) pursuant to which Emerson agreed to sell a controlling interest in its Network Power business to the Buyer Parties (the “Separation”). The Buyer Parties as well as Vertiv were formed on behalf of, and are controlled by, certain private equity investment funds advised by Platinum Advisors. Vertiv Holdings is majority owned by JV Holdings. JV Holdings is majority owned by Platinum. On the first closing of the Separation on November 30, 2016 (the “Closing Date”), the Buyer Parties acquired, either directly or through one or more subsidiaries, the assets and liabilities associated with the business, operations, products, services and activities of Emerson’s Network Power business (with certain country-specific exceptions as described in the following sentences). In several steps during December 2016, in accordance with the Transaction Agreement, Vertiv Group acquired the business, operations, products, services and activities of Emerson’s Network Power business in two additional jurisdictions. The operating results of these jurisdictions are not material. The Emerson Network Power business prior and up to the Closing Date is hereinafter referred to as the “Predecessor” while Vertiv and its subsidiaries after the Closing Date are hereinafter collectively referred to as the “Successor”. In addition, as part of the consideration under the Transaction Agreement, a subsidiary of Emerson received newly issued subordinated Class B units in Vertiv Holdings. Distributions to Emerson in respect of the Class B units are contingent upon JV Holdings first receiving a threshold return on its initial investment. As a result, as of the Closing Date, the controlling interests of Vertiv Holdings were indirectly held by Platinum in the form of Class A Units in Vertiv Holdings, with Emerson retaining a subordinated interest in distributions in the form of Class B units in Vertiv Holdings.

The consideration for the Separation was approximately $4,158.3, which included cash of $4,000.0, Class B units in Vertiv Holdings issued to Emerson, and post-closing purchase price adjustments of $135.6. In connection with the Separation, JV Holdings contributed approximately $1,200.0 in cash (the “Cash Equity Investment”) to Vertiv Holdings for a controlling interest in the issued and outstanding equity interests of Vertiv Holdings. Vertiv Holdings then contributed the Cash Equity Investment, through a series of intermediary subsidiaries, to Emerson in exchange for a controlling interest in the Emerson Network Power business.

Following the consummation of the transactions contemplated by the Transaction Agreement, all of the issued and outstanding equity interests in Vertiv Group are held directly by Vertiv Group Intermediate, Vertiv Group’s direct parent and indirectly controlled by Platinum.

In connection with the Separation, Vertiv Group issued the 2024 Senior Notes, entered into the Term Loan Facility, which was fully drawn on the Closing Date, and entered into the Asset-Based Revolving Credit Facility of which $42.0 was drawn on the Closing Date. A portion of the proceeds of such financings were used to finance the Separation consideration.

Recent developments

On December 28, 2017, Vertiv acquired Energy Labs Inc., a leading provider of direct and indirect air handling systems and modular data center solutions for $149.5. Vertiv believes this acquisition gives it a unique opportunity to accelerate efforts in the commercial and industrial segments while expanding capabilities and growing its presence in the data center space.

On February 1, 2018, Vertiv acquired Geist, a leading manufacturer of rack power distribution units, intelligent power, management, environmental monitoring and infrastructure management solutions for data centers for $123.6. During the second quarter of 2018, the acquisition was completed for an additional $2.5 of cash related to the purchase of additional assets. This acquisition bolsters Vertiv’s efforts to reach key customers in the cloud, collocation and edge spaces.

 

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On January 6, 2020, pursuant to the terms of the indentures governing the 2024 Senior Notes and the 2024 Senior Secured Notes and in anticipation of a change of control of Vertiv Group as a result of the Business Combinations, Vertiv Group initiated a conditional offer to purchase all of the outstanding 2024 Senior Notes and 2024 Senior Secured Notes from each registered holder thereof. A total of $500,000 principal amount of 2024 Senior Notes were tendered in the change of control offer and were repurchased on February 7, 2020.

On January 14, 2020, Vertiv Group Intermediate, Vertiv Group and certain of their direct and indirect subsidiaries entered into amendments to each of the Term Loan Facility and the Asset-Based Revolving Credit Facility with the respective agents and certain of the respective lenders party thereto. Such amendments permit the consummation of the Business Combination without triggering the change of the control provisions under the Term Loan Facility and the Asset-Based Revolving Credit Facility, and make certain market updates and other modifications to the terms of the Term Loan Facility and the Asset-Based Revolving Credit Facility.

To further our objective to explore future financing options to optimize our capital structure, including potential debt refinancing, on January 31, 2020, we commenced a process to refinance the Term Loan Facility and amend and extend the Asset-Based Revolving Credit Facility. The proposed refinancing transaction is expected to reduce our debt service requirements and leverage and to extend the maturity profile of our indebtedness. The proposed transaction is anticipated to close during the first quarter of 2020. As the terms of the proposed refinancing transaction have not been finalized, the structure, timing and anticipated impact are subject to change.

In connection with the proposed refinancing transaction, on January 31, 2020, we called all of our Existing Notes for conditional redemption on March 2, 2020, in accordance with the respective indentures. The redemptions are conditioned upon the completion of the proposed refinancing transactions on terms satisfactory to us and/or our affiliates.

On the Closing Date, we used a portion of the proceeds from the Business Combination, including the PIPE Investment, to repay $176 million of the outstanding indebtedness under the Asset-Based Revolving Credit Facility and approximately $1.29 billion of the outstanding indebtedness under the Term Loan Facility.

Basis of presentation

Prior to November 30, 2016, Vertiv operated as part of Emerson and not as a stand-alone company. For all periods prior to November 30, 2016, the combined financial statements were derived from Emerson’s historical financial statements and accounting records and they reflect the historical combined financial position, results of operations and cash flows of the business in conformity with U.S. GAAP. Financial statements pre-closing of the Separation are referred to as the “Predecessor.” On November 30, 2016, Vertiv began to operate as a stand-alone company and the financial statements reflect a new basis in the net assets acquired, measured at fair value on the acquisition date. Financial statements post-closing of the Separation are referred to as the “Successor.”

Prior to November 30, 2016, Vertiv participated in various Emerson programs which included information technology services, medical insurance and other programs. Costs associated with these programs have been charged based on Emerson’s cost and estimates of Vertiv’s usage. Vertiv also utilized Emerson’s global shared services centers and was charged for both direct costs and its share of facility overhead, which is allocated based on headcount or space occupied. Lastly, the Predecessor financial statements included in this prospectus reflect an allocation, based on revenue, of general corporate costs incurred by Emerson for support functions such as procurement, logistics, marketing, human resources, legal, finance and internal audit. Vertiv management believes the methodologies and assumptions used to allocate these costs to us are reasonable. The financial statements included in this prospectus may not reflect the actual costs that would have been incurred had Vertiv operated on a stand-alone basis during the periods presented. These costs also may not be indicative of the expenses that Vertiv will incur in the future.

 

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Emerson’s centralized treasury function managed the working capital and financing needs through November 30, 2016. This function oversaw a cash pooling arrangement that swept participating cash accounts into pooled Emerson cash accounts on a daily basis. For the Predecessor periods, pooled cash, cash equivalents and nontrade intercompany balances attributable to Emerson have not been presented as assets and liabilities in the financial statements included in this prospectus. These balances are reflected as “Net parent investment” in the equity section of the combined balance sheets. Changes in these balances are reflected as “Net transfer to parent” in the financing activities section of the combined statements of cash flow for the Predecessor periods.

All intercompany transactions among Vertiv entities have been eliminated. See the notes to the financial statements included in this prospectus for additional information regarding sale and purchase transactions between Vertiv and other Emerson affiliates.

On October 31, 2017, Vertiv completed the disposition of ASCO Power to Schneider Electric USA, Inc. for net proceeds of $1,250.0. In November 2017, the net proceeds from the disposition of ASCO Power were utilized to (i) make a $500.0 prepayment on the term loan facility, (ii) pay approximately $108.0 of consent and related fees to lenders under the Term Loan Facility and holders of the 2024 Senior Notes and 2022 Senior Notes and (iii) pay a $600.0 cash dividend to Vertiv Holdings. In addition, in connection with the closing of this sale, Vertiv amended the Term Loan Facility to permit the dividend described above. Following the announcement of Vertiv’s agreement to sell its ASCO Power critical power business on July 27, 2017, the results of operations of that business are included in the Net earnings (loss) from discontinued operations—net of income taxes for all periods presented (refer to Note 3 in the financial statements included in this prospectus).

Change in fiscal year end

On May 25, 2017, Vertiv changed its fiscal year end from September 30 to December 31. The change became effective at the end of the period ended December 31, 2016. Unless otherwise noted, all references to “fiscal year” in this report refer to the twelve-month fiscal year, which as of and prior to September 30, 2016, ended on September 30 of each year, and beginning after December 31, 2016, ends on December 31 of each year. In connection with this change, the following periods have been included in the audited consolidated financial statements and results of operations included elsewhere in this prospectus: the years ended December 31, 2018 and 2017, September 30, 2016; the one month period ended December 31, 2016; the two months ended November 30, 2016, and; the unaudited three months ended December 31, 2015.

Results of operations

Nine months ended September 30, 2019 and September 30, 2018

 

(Dollars in millions)

   Nine Months
Ended
September 30,
2019
    Nine Months
Ended
September 30,
2018
    $ Change     % Change  

Net sales

   $ 3,259.7     $ 3,114.0     $ 145.7       4.7

Cost of sales

     2,193.9       2,063.4       130.5       6.3

Gross profit

     1,065.8       1,050.6       15.2       1.4

Selling, general and administrative expenses

     809.0       920.4       (111.4     (12.1 )% 

Other deductions, net

     98.6       166.2       (67.6     (40.7 )% 

Earnings (loss) before interest & income taxes

     158.2       (36.0     194.2       (539.4 )% 

Interest expense, net

     234.2       213.5       20.7       9.7

Income tax expense

     30.9       32.2       (1.3     (4.0 )% 

Net loss from continuing operations

   $ (106.9   $ (281.7   $ 174.8       (62.1 )% 

Overview

Net sales for the nine months ended September 30, 2019 (“YTD 2019”) were $3,259.7, an increase of 4.7 percent from the same period in the prior year. There was a net loss from continuing operations of $106.9 in

 

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YTD 2019 compared to a net loss from continuing operations of $281.7 during the nine months ended September 30, 2018 (“YTD 2018”). The lower net loss from continuing operations in YTD 2019 is the result of the fluctuations discussed below.

Net sales

Net sales were $3,259.7 in YTD 2019, an increase of $145.7, or 4.7 percent, compared with $3,114.0 in YTD 2018. By offering critical infrastructure and solutions sales increased $170.2 including negative impacts from foreign currency of $49.0. Service and software solutions sales increased $25.5 including the negative impacts from foreign currency of $25.5. I.T. and edge infrastructure sales decreased $50.0 partially due to the negative impacts of foreign currency of $11.5 and lower sales across all regions.

By segment, prior to intersegment elimination, YTD 2019 net sales were $1,694.6 in the Americas, $985.9 in Asia Pacific and $714.0 in EMEA. Movements in net sales by segment and offering are each presented after eliminating intersegment sales and are detailed in the “Business Segments” section below.

Cost of sales

Cost of sales were $2,193.9 in YTD 2019, an increase of $130.5, or 6.3 percent compared to YTD 2018. The increase in cost of sales was primarily due to the flow-through impact of higher net sales volume. Gross profit was $1,065.8 in YTD 2019, or 32.7 percent of sales, compared to $1,050.6, or 33.7 percent of sales in YTD 2018. The fluctuation was primarily due to unfavorable mix.

Selling, general and administrative expenses

Selling, general and administrative expenses (“SG&A”) were $809.0 in YTD 2019, a decrease of $111.4 compared to YTD 2018. SG&A as a percentage of sales were 24.8 percent in YTD 2019, a 4.8 percent percentage point decrease when compared to 29.6 percent in YTD 2018. The primary driver behind the decrease in SG&A was lower spending related to transformation initiatives to improve operational efficiency and lower transition costs related to establishing the business as a stand-alone company.

Other deductions, net

Other deductions, net, were $98.6 in YTD 2019, a decrease of $67.6, or 40.7 percent, compared with YTD 2018. The decrease is primarily due to a decrease in restructuring costs as there were no significant new programs initiated during the current period, a decrease in amortization expense, and a revaluation of contingent consideration of $21.7 million in the prior year.

Earnings (loss) before interest & income taxes

Earnings before interest & income taxes (“EBIT”) was $158.2, an improvement of $194.2 when compared to loss of $36.0 in YTD 2018. On a segment basis, EBIT was $270.6 in the Americas, $116.8 in Asia Pacific, and $56.8 in EMEA. Corporate expenses were $286.0 in YTD 2019 due to transition/integration costs associated with standing up the business, implementation of cost reduction initiatives, digital project implementation costs, and costs that support global product platform development. See “—Business Segments” below for further details.

Interest expense, net

Interest expense, net, was $234.2 in YTD 2019 compared to $213.5 in YTD 2018. The $20.7 increase is primarily due to increased floating interest rates on the term loan facility, the ABL facility, and the 2024 Senior Secured Notes issued in Q2 2019.

 

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Income tax expense

Income tax expense was $30.9 in YTD 2019 versus $32.2 in YTD 2018. The YTD 2019 tax expense was lower than YTD 2018 primarily due to discrete tax benefits recorded related to (1) a change in our indefinite reinvestment liability caused by movement in foreign currencies and updates to the calculation resulting from information obtained commensurate with the filing of the company’s 2018 U.S. federal income tax return, and (2) other adjustments related to reconciliations of statutory income tax payable balances based on an analysis of income tax returns filed before the end of October 2019 that is offsetting increased tax expense from improved operating performance in jurisdictions outside the U.S. where the Company is profitable and does not have tax attributes available for offset.

Business segments

The following is detail of business segment results for the nine months ended September 30, 2019 and 2018. Segment net sales are presented prior to eliminating intersegment sales. Segment earnings are defined as earnings before interest and income taxes. Segment margin represents segment earnings expressed as a percentage of segment net sales. For reconciliations of segment net sales and earnings to the Vertiv’s consolidated results, see Note 15 to the unaudited condensed consolidated financial statements.

Americas

 

(Dollars in millions)

   Nine months
ended
September 30,
2019
    Nine months
ended
September 30,
2018
    $ Change      % Change  

Net sales

   $ 1,694.6     $ 1,614.4     $ 80.2        5.0

Earnings before interest and taxes

     270.6       222.1       48.5        21.8

Margin

     16.0     13.8     

Americas net sales were $1,694.6 in YTD 2019, an increase of $80.2, or 5.0 percent from YTD 2018. By offering, net sales increased primarily due to increased critical infrastructure and solutions sales of $102.3 and increased services and software solutions sales of $5.1, offset by a $26.7 decrease in I.T. and edge infrastructure. Additionally, Americas net sales were negatively impacted by foreign currency by approximately $9.0.

Earnings before interest and taxes in YTD 2019 was $270.6, an increase of $48.5 compared with YTD 2018. Margin increased 2.3 percentage points primarily due to increases in volume and reduction in SG&A spend.

Asia Pacific

 

(Dollars in millions)

   Nine months
ended
September 30,
2019
    Nine months
ended
September 30,
2018
    $ Change      % Change  

Net sales

   $ 985.9     $ 975.2     $ 10.7        1.1

Earnings before interest and taxes

     116.8       92.9       23.9        25.7

Margin

     11.8     9.5     

Asia Pacific net sales were $985.9 in YTD 2019, an increase of $10.7, or 1.1 percent from YTD 2018. By offering, net sales increased primarily due to increased critical infrastructure and solutions sales of $18.6. This increase was partially offset by a decrease in I.T. and edge infrastructure of $8.8 and services and software solutions of $3.3. Foreign currency negatively impacted net sales by $38.0.

Earnings before interest and taxes was $116.8 in YTD 2019, an increase of $23.9 compared with YTD 2018 primarily due to reductions in SG&A spend and increased sales volume in China.

 

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Europe, Middle East & Africa

 

(Dollars in millions)

   Nine months
ended
September 30,
2019
    Nine months
ended
September 30,
2018
    $ Change      % Change  

Net sales

   $ 714.0     $ 654.7     $ 59.3        9.1

Earnings before interest and taxes

     56.8       12.4       44.4        358.1

Margin

     8.0     1.9     

EMEA net sales were $714.0 in YTD 2019, an increase of $59.3, or 9.1 percent from YTD 2018. By offering, net sales increased primarily due to increased critical infrastructure and solutions sales of $44.5 and services and software solutions of $23.7. This increase was partially offset by a decrease in I.T. and edge infrastructure of $14.5. Foreign currency negatively impacted net sales by $39.0.

The region’s earnings before interest and taxes was $56.8 in YTD 2019, an improvement of $44.4 compared with YTD 2018. Margin improved 6.1 percentage points primarily due to increases in volume and reductions in SG&A spend.

Vertiv corporate and other

Corporate and other costs include costs associated with Vertiv’s headquarters located in Columbus, Ohio, as well as centralized global functions including Finance, Treasury, Risk Management, Strategy & Marketing, IT, global product platform development, and Legal. Corporate and other costs were $286.0 and $363.4 in YTD 2019 and 2018, respectively. The $77.4 decrease in corporate and other expenses in YTD 2019 versus the comparable prior year period was primarily the result of decreased expenses related to transition costs and operational initiatives.

Year ended December 31, 2018 compared to year ended December 31, 2017

 

(Dollars in millions)

   2018     2017     $ Change     % Change  

Net sales

   $ 4,285.6     $ 3,879.4     $ 406.2       10.5

Cost of sales

     2,865.2       2,566.8       298.4       11.6

Gross profit

     1,420.4       1,312.6       107.8       8.2

Selling, general & administrative expenses

     1,223.8       1,086.0       137.8       12.7

Other deductions, net

     178.8       254.4       (75.6     (29.7 )% 

Income (loss) from continuing operations before interest & income taxes

     17.8       (27.8     45.6       (164.0 )% 

Interest expense, net

     288.8       379.3       (90.5     (23.9 )% 

Income tax expense (benefit)

     49.9       (19.7     69.6       (353.3 )% 

Loss from continuing operations

   $ (320.9   $ (387.4   $ 66.5       (17.2 )% 

Overview

Net sales for the year ended December 31, 2018 (“2018”) were $4,285.6, an increase of 10.5 percent from the same period in the prior year. There was a net loss from continuing operations of $320.9 in 2018 compared to a net loss from continuing operations of $387.4 during the year ended December 31, 2017 (“2017”). The decrease in net loss from continuing operations in 2018 is a result of the combination of the variances discussed below.

Net sales

Net sales were $4,285.6 in 2018, an increase of $406.2, or 10.5 percent, compared with $3,879.4 in 2017. By offering, critical infrastructure and solutions sales increased $314.8 primarily due to the Energy Labs

 

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acquisition which increased sales $117.8. Service and software solutions sales increased $60.1, including positive impacts from purchase accounting of $17.6. I.T. and edge infrastructure sales increased $30.7, partially from the Geist acquisition which increased sales by $76.2, offset by lower sales in the Americas and EMEA.

By segment, prior to intersegment elimination, 2018 net sales were $2,175.6 in the Americas, $1,346.9 in Asia Pacific and $938.0 in EMEA. Movements in net sales by segment and offering are each presented prior to eliminating intersegment sales and are detailed in the “Business segments” section below.

Cost of sales

Cost of sales were $2,865.2 in 2018, an increase of $298.4, or 11.6 percent compared to 2017. The increase in cost of sales was primarily due to the flow-through impact of higher net sales volume and inflationary cost pressure in both materials and freight. Gross profit was $1,420.4 in 2018, or 33.1 percent of sales, compared to $1,312.6, or 33.8 percent of sales in 2017.

Selling, general and administrative expenses

SG&A were $1,223.8 in 2018, an increase of $137.8 compared to 2017. SG&A as a percentage of sales were 28.5 percent in 2018, a 0.5 percentage point increase compared with 28.0 percent in 2017. The primary driver behind the increase in SG&A was due to spending to establish the business as a stand-alone company (primarily related to IT), as well as initiatives to improve operational efficiency.

Other deductions, net

Other deductions, net, were $178.8 in 2018, a decrease of $75.6, or 29.7 percent, compared with 2017. The decrease is primarily due to lower amortization of intangibles.

Income (loss) from continuing operations before interest & income taxes

Income from continuing operations before interest & income taxes in 2018 was $17.8, an increase of $45.6 when compared to a loss of $27.8 in 2017. On a segment basis, EBIT was $301.0 in the Americas, $136.6 in Asia Pacific, and $29.8 in EMEA. Corporate expenses were $449.6 in 2018 due to transition/integration costs associated with standing up the business and implementation of cost reduction initiatives. See “—Business segments” below for further details.

Interest expense

Interest expense, net, was $288.8 in 2018 compared to $379.3 in 2017. The $90.5 decrease is primarily due to the 2017 payment of consent fees associated with amending the term loan facility.

Income taxes

Income tax expense was $49.9 in 2018 versus a benefit of $19.7 in 2017. The 2018 taxes are higher than 2017 primarily due to the impact of the global intangible low-taxed income provisions of the U.S. Tax Cuts and Jobs Act (the “Act”) and the mix of income between Vertiv’s U.S. and non-U.S. operations which is offset by changes in valuation allowance for U.S. federal purposes. The 2017 result was affected primarily by the recognition of a valuation allowance for U.S. federal and state purposes and certain non-U.S. jurisdictions, the impact of the Act, changes in uncertain tax positions, withholding taxes on repatriation of earnings, and other payments made between affiliates.

Business segments

The following is detail of business segment results for the years ended December 31, 2018 and 2017. Segment net sales are presented prior to eliminating intersegment sales. Segment earnings are defined as earnings

 

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before interest and income taxes. Segment margin represents segment earnings expressed as a percentage of segment net sales. For reconciliations of segment net sales and earnings to Vertiv’s consolidated results, see Note 16 to the combined and consolidated financial statements.

Beginning with the first quarter of 2019, the segment performance measure excludes certain costs that support global product platform development and digital as a result of a change in the way Vertiv’s chief operating decision maker evaluates the performance of operations, develops strategy and allocates capital resources. Such costs are now included in Corporate and other. Vertiv also revised sales by product and service offering categories during the first quarter of 2019. As such, the segment earnings before interest and income taxes for the years ended December 31, 2018 and 2017, and related analysis, have been restated below to conform with the 2019 presentation and analysis.

Americas

 

(Dollars in millions)

   December 31,
2018
    December 31,
2017
    $ Change      % Change  

Net sales

   $ 2,175.6     $ 1,886.7     $ 288.9        15.3

Earnings before interest and taxes

     301.0       241.8       59.2        24.5

Margin

     13.8     12.8     

Americas net sales were $2,175.6 in 2018, an increase of $288.9, or 15.3 percent from 2017. By offering, net sales increased primarily due to increased critical infrastructure and solutions sales of $224.4, primarily due to the Energy Labs acquisition which increased sales by $117.8. Service and software solutions sales increased $13.8, including positive impacts from purchase accounting of $17.6 year-over-year. I.T. and edge infrastructure sales increased $45.5, primarily from the Geist acquisition.

Earnings before interest and taxes in 2018 was $301.0, an increase of $59.2 compared with 2017. Margin improved 1.0 percentage points from the benefit of cost reduction actions, decreased intangible amortization, and earnings from the acquisitions.

Asia Pacific

 

(Dollars in millions)

   December 31,
2018
    December 31,
2017
    $ Change      % Change  

Net sales

   $ 1,346.9     $ 1,239.5     $ 107.4        8.7

Earnings before interest and taxes

     136.6       64.2       72.4        112.8

Margin

     10.1     5.2     

Asia Pacific net sales were $1,346.9 in 2018, an increase of $107.4, or 8.7 percent from 2017. This increase includes unfavorable impacts from foreign currency of $6.0. All offerings experienced increases as there was an increase in customer capital spending within the Colocation/Hyperscale space on large data center projects.

Earnings before interest and taxes were $136.6 in 2018, an increase of $72.4 compared with 2017. Margin improved 4.9 percentage points on savings from previous cost reduction actions, lower amortization expense, and volume increases.

Europe, Middle East & Africa

 

(Dollars in millions)

   December 31,
2018
    December 31,
2017
    $ Change      % Change  

Net sales

   $ 938.0     $ 918.1     $ 19.9        2.2

Earnings (loss) before interest and taxes

     29.8       45.4       (15.6      (34.4 )% 

Margin

     3.2     4.9     

 

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EMEA net sales were $938.0 in 2018, an increase of $19.9, or 2.2 percent from 2017. This increase includes favorable impacts from foreign currency of $17.0. Additionally, the favorable impacts of the acquisition of Geist and current year impact of purchase accounting were offset by volume decreases due to changes in customer timing mainly in the I.T. and edge infrastructure offering.

Loss before interest and taxes was $29.8 in 2018, a decrease of $15.6 compared with 2017. Margin decreased 1.7 percentage points primarily due to changes in intercompany transfer pricing.

Vertiv Corporate and Other

Corporate and other costs include costs associated with Vertiv’s headquarters located in Columbus, Ohio, as well as centralized global functions including Finance, Treasury, Risk Management, Strategy & Marketing, IT, global product platform development, and Legal. Corporate and other costs were $449.6 and $379.2 in 2018 and 2017, respectively. The $70.4 increase in corporate and other expenses in 2018 versus 2017 was primarily the result of increased expenses related to digital project implementation costs.

Year ended December 31, 2017 compared to fiscal year ended September 30, 2016

 

(Dollars in millions)

   2017     2016     $ Change     % Change  

Net sales

   $ 3,879.4     $ 3,943.5     $ (64.1     (1.6 )% 

Cost of sales

     2,566.8       2,532.6       34.2       1.4

Gross profit

     1,312.6       1,410.9       (98.3     (7.0 )% 

SG&A

     1,086.0       980.8       105.2       10.7

Goodwill impairment

     —         57.0       (57.0     (100.0 )% 

Other deductions, net

     254.4       125.9       128.5       102.1

Earnings (loss) from continuing operations before interest & income taxes

     (27.8     247.2       (275.0     (111.2 )% 

Interest expense, net

     379.3       (3.5     382.8       nm  

Income tax expense (benefit)

     (19.7     140.1       (159.8     (114.1 )% 

Net earnings (loss) from continuing operations

   $ (387.4   $ 110.6     $ (498.0     (450.3 )% 

Overview

Net sales for 2017 were $3,879.4, a decrease of 1.6 percent from the year ended September 30, 2016 (“2016”), and such decrease primarily resulted from volume decreases (discussed below) as well as the impacts of purchase accounting and foreign currency fluctuations. There was a net loss from continuing operations of $387.4 in 2017 compared to net earnings from continuing operations of $110.6 in 2016. The net loss from continuing operations in 2017 was largely due to the impact of transition costs, the impact of purchase accounting, primarily associated with increased amortization related to the recognition of the fair value of certain intangible assets, and higher interest charges associated with long-term debt borrowed in connection with the Separation.

Net sales

Net sales were $3,879.4 in 2017, a decrease of $64.1, or 1.6 percent, compared with $3,943.5 in 2016. The decrease was primarily due to volume decreases (discussed below) and purchase accounting adjustments from the valuation of acquired deferred revenue of $31.6.

By segment, prior to intersegment eliminations, net sales declined in all segments including in the Americas by $13.7, in Asia Pacific by $36.4 and in EMEA by $12.3. By offering, net sales in the power management product offerings experienced a decline of $136.7 or 7.3 percent primarily due to timing and magnitude of large

 

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projects in 2016 and a pause in capital investment especially by telecommunication companies in Asia Pacific, while thermal management product offerings increased by $58.7 or 8.2 percent, and IT and Edge infrastructure and solutions offerings experienced a net sales increase of $23.1 or 5.9 percent as customers increased their spending again after holding back in 2016. The services offerings decreased by $9.2 or 1 percent compared to 2016 due to the impact of purchase accounting. By geography, underlying destination sales increased slightly in the U.S. and international sales were down broadly, partially offset by modest growth in EMEA.

Movements in net sales by segment and offering previously discussed are each presented prior to eliminating intersegment sales and are discussed in greater detail in the “Business segment” discussion below.

Cost of sales

Costs of sales were $2,566.8 in 2017, an increase of $34.2, or 1.4 percent compared to 2016. The increase in cost of sales was primarily due to changes in product mix and a slight overall shift towards lower margin products as noted by the increase in thermal sales and the decrease in service sales. Gross profit was $1,312.6 in 2017, or 33.8 percent of net sales, compared to $1,410.9, or 35.8 percent of net sales in 2016. The decrease in gross profit as a percentage of net sales was due to the impact of purchase accounting on reported revenue (approximately 0.5% reduction) as well as the impact of product mix noted above.

Selling, general and administrative expenses

SG&A expenses were $1,086.0 in 2017, an increase of $105.2 compared to 2016. SG&A as a percent of sales was 28.0 percent in 2017, compared to 24.9 percent in 2016. The primary driver behind the increase in SG&A expense was due to increased spending on operating initiatives to align the cost structure with current levels of business and to improve operational efficiency which began prior to and continued after the closing.

Goodwill impairment

During the year ended September 30, 2016, goodwill was impaired related to EMEA by $57.0. This impairment was a result of the lower than forecasted operating results in the EMEA segment.

Other deductions, net

Other deductions, net was $254.4 in 2017, a $128.5 increase from 2016 primarily due to the increase in amortization of intangibles associated with purchase accounting.

Earnings (loss) from continuing operations before interest & income taxes

Earnings (loss) from continuing operations before interest and income taxes (“EBIT”) was a loss of $27.8 in 2017, a decrease of $275.0 when compared to earnings of $247.2 in 2016. On a segment basis, EBIT declined by $17.6 in the Americas, $44.1 in Asia Pacific, and increased by $42.9 in EMEA. Corporate expenses increased approximately $316.7 due to costs associated with becoming an independent company, as well as implementation of cost reduction initiatives, partially offset by a gain related to an adjustment to the contingent consideration booked in accordance with the Separation. See “—Business segments” below for further discussion.

Interest expense

Interest expense, net was $379.3 in 2017 and $(3.5) in 2016. The increase in interest expense in 2017 was due to interest on the long-term debt borrowed in connection with the Separation as well as interest on the 2022 Senior Notes.

 

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Income taxes

Income tax benefit was $19.7 in 2017 as compared to income tax expense of $140.1 in 2016, which decreased $159.8, due to a decrease in earnings before income taxes, prior year withholding and dividend taxes and goodwill impairment charges which did not reoccur, partially offset by the effects of the 2017 Tax Act and valuation allowance recorded in the U.S. reducing the income tax benefit associated with losses incurred in the U.S.

The 2017 Tax Act was enacted on December 22, 2017. Among other things, effective in the first taxable year after the enactment, the 2017 Tax Act reduces the U.S. federal corporate tax rate from 35% to 21% and exempts from U.S. federal income taxation dividends from certain foreign corporations to their U.S. stockholders. The 2017 Tax Act also requires U.S. companies to pay a one-time transition tax on earnings of certain foreign corporate subsidiaries that were previously deferred from U.S. taxation. Further, the 2017 Tax Act impacts certain deductions by limiting or eliminating them and it subjects certain foreign earnings to U.S. tax.

Net earnings (loss) from continuing operations

Net loss from continuing operations was $387.4 in 2017 compared to net earnings from continuing operations of $110.6 in 2016. The decrease of $498.0 was primarily due to the impact of purchase accounting and higher interest charges associated with long-term debt borrowed in connection with the Separation and the 2022 Senior Notes.

Business segments

The following is an analysis of business segment results for 2017 as compared with 2016. Segment sales are presented prior to eliminating intersegment sales. Segment earnings are defined as earnings before interest and income taxes. Segment margin represents segment earnings expressed as a percentage of segment sales. For reconciliations of segment sales and earnings to Vertiv Holdings’ consolidated results, see Note 16 to the combined and consolidated financial statements included elsewhere in this prospectus. Additionally, the segment earnings before interest and income taxes for the Successor period was restated below to conform with the 2019 presentation and analysis; however, Vertiv determined that it was not practicable to restate the Predecessor periods.

Americas

 

(Dollars in millions)

   December 31,
2017
    September 30,
2016
    $ Change      % Change  

Net sales

   $ 1,886.7     $ 1,900.4     $ (13.7      (0.7 )% 

Earnings before interest and taxes

     241.8       259.4       (17.6      (6.8 )% 

Margin

     12.8     13.6     

Americas’ net sales were $1,886.7 in 2017, a decrease of $13.7, or 0.7 percent from 2016, primarily due to deferred revenue adjustments from purchase accounting of $21.7.

Earnings before interest and taxes were $241.8 in 2017, a decrease of $17.6, or (6.8) percent, compared with the prior year period while margins declined 0.8 percentage points. The decrease in earnings was primarily due to the impact of purchase accounting, specifically the amortization of intangible assets.

Asia Pacific

 

(Dollars in millions)

   December 31,
2017
    September 30,
2016
    $ Change      % Change  

Net sales

   $ 1,239.5     $ 1,275.9     $ (36.4      (2.9 )% 

Earnings before interest and taxes

     64.2       108.3       (44.1      (40.7 )% 

Margin

     5.2     8.5     

 

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Asia Pacific net sales were $1,239.5 in 2017, a decrease of $36.4 or 2.9 percent from 2016 as a result of lower volumes sold, primarily power management offerings in China where several industries had capital investment spending below 2016 levels, as well as the effects of purchase accounting of $2.6.

Earnings before interest and taxes were $64.2 in 2017, representing a decrease in earnings of $44.1, or 40.7 percent, from 2016. Margin declined 3.3 percentage points primarily from the impact of purchase accounting, specifically the amortization of intangible assets.

Europe, Middle East & Africa

 

(Dollars in millions)

   December 31,
2017
    September 30,
2016
    $ Change      % Change  

Net sales

   $ 918.1     $ 930.4     $ (12.3      (1.3 )% 

Earnings before interest and taxes

     45.4       2.5       42.9        1716.0

Margin

     4.9     0.3     

EMEA net sales were $918.1 in 2017, a decrease of $12.3, or 1.3 percent, primarily due to product mix and adverse effects of purchase accounting of $7.0.

Earnings before interest and taxes were $45.4 in 2017, representing an increase in earnings of $42.9, compared to earnings of $2.5 for 2016. The increase was primarily due to the $57.0 goodwill impairment charge in 2016, offset by unfavorable product mix changes and the impact of purchase accounting.

Vertiv corporate and other

Corporate and other costs include costs associated with Vertiv’s headquarters located in Columbus, Ohio, as well as centralized global functions including Finance, Treasury, Risk Management, Strategy & Marketing, IT and Legal. Corporate and other costs were $379.2 and $62.5 in the 2017 and 2016 periods, respectively. The $316.7 increase in corporate and other expenses in 2017 versus the comparable prior year period was primarily the result of increased expenses related to the establishment of the business and initiatives to improve operational efficiency which began prior to and after the closing of the Separation and the inclusion of global product platform development support costs in 2017. This spend was partially offset by a gain related to an adjustment to the contingent consideration booked in accordance with the Separation.

One month ended December 31, 2016 and two months ended November 30, 2016 compared to the unaudited three months ended December 31, 2015

 

     Successor            Predecessor  

(Dollars in millions)

   One month ended
December 31, 2016
           Two months ended
November 30, 2016
    Three months ended
December 31, 2015
 

Net sales

   $ 301.7          $ 566.2     $ 953.5  

Cost of sales

     240.3            369.3       611.8  

Gross profit

     61.4            196.9       341.7  

SG&A

     162.3            164.3       246.6  

Other deductions, net

     42.5            14.7       30.1  

Earnings (loss) from continuing operations before interest & income taxes

     (143.4          17.9       65.0  

Interest expense, net

     27.8            0.3       (0.5

Income tax expense (benefit)

     (4.3          24.3       19.1  

Net earnings (loss) from continuing operations

   $ (166.9        $ (6.7   $ 46.4  

 

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Overview

On May 25, 2017, the Board of Directors approved a change in the Company’s fiscal year end from September 30, to December 31. Accordingly, the Company is presenting unaudited financial information for the three month period ended December 31, 2015 for comparative purposes.

Net sales were $301.7 for the one-month ended December 31, 2016 and $566.2 for the two-months ended November 30, 2016, as compared to $953.5 for the three months ended December 31, 2015. The net loss from continuing operations of $166.9 for the one-month ended December 31, 2016 was primarily due to the impact of non-recurring transaction and transition costs, the impact of purchase accounting, primarily associated with increased amortization related to the recognition of the fair value of certain intangible assets, and higher interest charges associated with long-term debt borrowed in connection with the Separation.

Net sales

Net sales were $301.7 for the one-month ended December 31, 2016, and $566.2 for the two-months ended November 30, 2016, as compared to $953.5 for the three months ended December 31, 2015. The impact of purchase accounting adjustments related to valuation of acquired deferred revenue for the one-month ended December 31, 2016 was approximately $7.0.

Cost of sales

Cost of sales were $240.3 for the one-month ended December 31, 2016, and $369.3 for the two-months ended November 30, 2016, as compared to $611.8 for the three months ended December 31, 2015. Gross profit was $61.4 for one-month ended December 31, 2016, (or 20.4 percent of sales), and $196.9 for the two-months ended November 30, 2016, (or 34.8 percent of sales), as compared to $341.7 for the three months ended December 31, 2015 (or 35.8 percent of sales). The decrease in gross profit as a percentage of sales for the Successor period was primarily due to the negative impact of product mix and purchase accounting adjustments.

Selling, general and administrative expenses

SG&A expenses were $162.3 (53.8 percent of sales) for the one-month ended December 31, 2016, and $164.3 for the two-months ended November 30, 2016 (29.0 percent of sales), as compared to $246.6 (or 25.9 percent of sales) for the three months ended December 31, 2015. The primary driver behind this increase in SG&A expenses in the Successor period was due to increased spending on operating initiatives to align cost structure with current levels of business and to improve operational efficiency which began prior to and after the closing as well as higher transaction related expenses.

Other deductions, net

Other deductions, net were $42.5 (or 14.1 percent of sales) for the one-month ended December 31, 2016, for the two-months ended November 30, 2016 were $14.7 (or 2.6 percent of sales), compared to $30.1 (or 3.2 percent of sales) for the three months ended December 31, 2015. The increase in the Successor period is primarily due to the increase in amortization of intangibles associated with purchase accounting.

Earnings (loss) from continuing operations before interest & income taxes

Earnings (loss) from continuing operations before interest and income taxes (“EBIT”) was a loss of $143.4 (or 47.5 percent of sales) for the one-month ended December 31, 2016, for the two-months ended November 30, 2016 was earnings of $17.9 (or 3.2 percent of sales), compared to earnings of $65.0 (or 6.8 percent of sales) for the three months ended December 31, 2015. On a segment basis for the Successor period, EBIT was a loss of $13.6 in the Americas, a loss of $40.0 in Asia Pacific, and earnings of $0.1 in EMEA. Corporate expenses

 

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increased $77.0 in the one-month ended December 31, 2016 from the two-months ended November 30, 2016 due to transition/integration costs associated with establishing the business, as well as implementation of cost reduction initiatives. See “—Business segments” below for further details.

Interest

Interest expense, net was $27.8 in the one-month ended December 31, 2016 due to the long-term debt borrowed in connection with the Separation.

Income taxes

Income tax benefit of $4.3 was recorded in the one-month ended December 31, 2016, income tax expense of $24.3 was recorded for the two-months ended November 30, 2016, and income tax expense of $19.1 was recorded for the three months ended December 31, 2015. The change is due to the change in earnings before income taxes which decreased income taxes offset by an increase for withholding and dividend taxes and the valuation allowance recorded in the U.S. reducing the income tax benefit with the associated losses incurred in the U.S.

Net earnings (loss) from continuing operations

Net earnings (loss) from continuing operations was a loss of $166.9 for the one-month ended December 31, 2016, loss of $6.7 for the two-months ended November 30, 2016, compared to earnings of $46.4 for the three months ended December 31, 2015. The decrease in the Successor period is due to the impact of non-recurring transaction and transition costs, the impact of purchase accounting, primarily associated with increased amortization related to the recognition of the fair value of certain intangible assets, and higher interest charges associated with long-term debt borrowed in connection with the Separation.

Business segments

The following is detail of business segment results for the one month period ended December 31, 2016, the two months ended November 30, 2016, and the unaudited three months ended December 31, 2015. To better align the reportable segments to the geographical manner in which they are managed, certain entities were moved between reportable segments in the first quarter of 2017. As a result of this change, Vertiv Holdings reclassified prior year segment information to conform to the current period presentation. Segment sales are presented prior to eliminating intersegment sales. Segment earnings are defined as earnings before interest and income taxes. Segment margin represents segment earnings expressed as a percentage of segment sales. For reconciliations of segment sales and earnings to Vertiv Holdings’ consolidated results, see Note 16 to the unaudited condensed combined and consolidated financial statements included elsewhere in this prospectus. Additionally, the segment earnings before interest and income taxes for the Successor period was restated below to conform with the 2019 presentation and analysis; however, Vertiv Holdings determined that it was not practicable to restate the Predecessor periods.

Americas

 

     Successor            Predecessor  

(Dollars in millions)

   One month ended
December 31, 2016
           Two months ended
November 30, 2016
    Three months ended
December 31, 2015
 

Net sales

   $ 149.1          $ 318.2     $ 442.0  

Earnings (loss) before interest and taxes

     (13.6          33.2       57.3  

Margin

     (9.1 )%           10.4     13.0

Americas’ net sales were $149.1 for the one-month ended December 31, 2016, $318.2 for the two-months ended November 30, 2016, compared to $442.0 for the three months ended December 31, 2015.

 

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Loss before interest and taxes for the one-month ended December 31, 2016 was $13.6, earnings for the two-months ended November 30, 2016 was $33.2, compared to $57.3 for the three months ended December 31, 2015. The decrease in segment margin was primarily due to the impact of purchase accounting, specifically the amortization of intangible assets.

Asia Pacific

 

     Successor            Predecessor  

(Dollars in millions)

   One month ended
December 31, 2016
           Two months ended
November 30, 2016
    Three months ended
December 31, 2015
 

Net sales

   $ 91.2          $ 152.0     $ 310.1  

Earnings (loss) before interest and taxes

     (40.0          5.4       29.3  

Margin

     (43.9 )%           3.6